Best Buy on Tuesday reported its biggest same-store sales jump in seven years but its chief executive deflated investors by warning analysts not to expect such increases to be “a new normal.”
The company outshone many other retailers as it posted a 5.4% surge in comparable sales for the second quarter. Overall revenue rose 5% to $8.94 billion, with growth coming from categories including computing, wearables, smart home, mobile phones, and appliances.
Analysts had expected comp sales growth of 2.2% and revenue of $8.66 billion. Best Buy also earned 69 cents a share, adjusted, beating estimates of 63 cents.
“Our higher-than-expected comparable sales of 5.4% were driven by stronger consumer demand for technology products and by the strong execution of our strategy,” CEO Hubert Joly said in a news release. “Against a backdrop of continued healthy consumer confidence, we believe broad-based product innovation is resonating with consumers and driving higher spend.”
But in a later earnings call, Joly cautioned that competition is expected to intensify and mid-single-digit comp sales growth is not a “new normal.” Best Buy stock, which closed just below its record high the day before, fell nearly 12% on Tuesday to $55.02.
“This team and this company has done a masterful job of turning around this business and positioning it well for its future,” UBS analyst Michael Lasser told CNBC. “From here, it really needs to drive earnings growth in order for the stock to appreciate significantly.”
Matt Sargent, senior vice president of retail for consulting firm Magid, told the Minneapolis Star-Tribune that Best Buy executives were trying to dampen excitement since its sales in the first half of the year tend to be mostly from tech enthusiasts. The second half of the year, dominated by gift givers, is when other retailers become more promotional and Amazon becomes an especially appealing option.
“I think traders and the market are so jittery about Amazon that they’re overreacting,” he said.
Joly, meanwhile, took the stock drop in stride. “What we focus on is driving performance over time,” he told reporters.