Best Buy reported a surprising quarterly increase in same-store sales, sending its stock to an 11-year high and suggesting that it is putting together an effective response to online competition.
The electronics retailer had warned in March that comparable sales could fall by 1% to 2% during the first quarter, but on Thursday it reported growth of 1.6% at its established locations. Analysts were expecting a 1.5% decline.
Best Buy shares rose more than 21% to $61.25 on news of the earnings, which also showed that revenue climbed 1%, to $8.53 billion, beating the average analysts’ forecast for $8.28 billion. Net income fell to $188 million, or 60 cents per share, in the latest quarter, from $229 million, or 70 cents a share, a year earlier, but that comfortably beat estimates of 40 cents per share.
“We are pleased today to report strong top and bottom line results for the first quarter of fiscal 2018,” CEO Hubert Joly said in a news release. “Our Q1 performance reflects the strength of our customer value proposition and continued momentum in the execution of our strategy.”
The top line benefited from the anticipated arrival of delayed federal tax refund checks, the bankruptcy of competitor hhgregg Inc., and strong demand for gaming and mobile products. Best Buy also delivered digital sales growth of more than 22%.
The company has “figured out where to play” against e-commerce giant Amazon, making it a good example of a traditional retailer “really embracing online commerce,” Oppenheimer retail analyst Brian Nagel told CNBC.
Like other retailers, Best Buy has been facing stiff competition from Amazon, with some analysts fearing it would suffer from “showrooming,” where shoppers touch and feel products at a store, only to seal the final deal online.
But according to CNBC, it has been “matching competitive online prices in its stores, renting portions of its floor space to Samsung and Microsoft, ditching an overseas expansion strategy and instead focusing on selling higher-margin electronics and appliances.”
Best Buy said it expects second-quarter comparable sales to grow 1.5% to 2.5%.