Best Buy’s Sales Surprise; Deal With CVS

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Best Buy pickup at CVS, UPS

Best Buy on Tuesday reported better-than-expected sales for the recent quarter and an improved forecast for the full year.  It also made several announcements on speeding and improving online delivery, including allowing consumers to pickup packages they ordered at CVS and UPS in a test trial.

Best Buy added 175 alternative pickup locations during the quarter ending November 2, including UPS and CVS in New York and Chicago.  Online customers in NY, Chicago and Los Angeles  can also now order as late as 8pm and receive products the next day at no extra charge.  In most of the US over the holidays, customers  can order by 3pm for free next day delivery.

Starting in NY, they can also get products on the same day in three-hour delivery windows. Curb-side pick up has also been implemented in New York where a Best Buy employee will bring the product directly to the customer’s car.

Mike Mohan, Best Buy President and COO said, “Fulfillment in New York is a great place for us to start because of the density of consumers and our sheer lack of stores there.  Alternative pickup locations and curb-side pickup…we see an opportunity for these nationally.”

Best BuyBest Buy also aims to expand its in-home advisor visits in New York. It’s adding more advisors and increasing training for existing advisors. It added 100 in-home advisors in the quarter, with a total now at 720.

Its Total Tech Support program (Geek Squad support and discounts on installation for $200/year) has grown to 2 million users, up from 200,000 upon launch in May last year.

The chain is now test marketing adding computer network set up to Total Tech Support to include router setup, parental control to manage every device on the network, a subscription to Microsoft Office 365, and one terabyte of cloud storage.

On tariffs, Best Buy said it didn’t experience a material impact in Q3 but it has built in a tariff impact into its Q4 forecast. It has been making changes in suppliers and products carried and its vendors have made changes to where they manufacture as a results of the tariffs on Chinese goods.  A set of new tariffs on products including smartphones is expected to take effect on December 15.

In all, Best Buy announced the following results:

  • Earnings per share, adjusted: $1.13 vs. $1.03 expected
  • Revenue: $9.76 billion vs. $9.70 billion expected (up from$9.379 billion a year ago)

US same store sales increased 2 percent year over year with growth in appliances, headphones, tablets and computing. This was partially offset by lower sales in gaming and home theater. For more Best Buy results click here.

Best Buy is updating its full-year FY20 financial outlook to the following:

  • Revenue of $43.1 billion to $43.6 billion, which compares to prior guidance of $42.9 billion to $43.9 billion
  • Comparable sales growth of 0.7% to 1.7%, which compares to prior guidance of 0.5% to 2.5%
  • Non-GAAP operating income rate flat to slightly up from the 4.6% rate in FY19

Source: Best Buy, CNBC



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