Best Buy’s web sales grow 29%
May 28, 2014 12:05 PM
It was a good first quarter online for Best Buy Co. Inc., thanks to more web orders shipped from stores. Earnings news was tempered by a dip in overall revenue.
The first quarter was the first full one that Best Buy was able to ship out of all 1,400 retail stores, which boosted online sales as well as conversion rates, president and CEO Hubert Joly told analysts on the company’s earnings call last week.
“In our online business, we continue to leverage our ship-from-store, digital marketing and enhanced site functionality to drive a 29% increase in domestic comparable online sales,” Joly told investors, based on a transcript of the call from Seeking Alpha. Web sales also got a lift from “a higher average order value, increased traffic driven by greater investment in online digital marketing and a higher number of online orders being placed in our retail stores,” Joly said.
“We also leveraged ship-from-store to drive improved margins on clearance and end-of-life inventory that has been historically trapped in our stores,” Joly said. “Our ship-from-store capability allows us to expose this inventory to our online customers, and with this exposure, we're beginning to achieve higher margins.”
Other contributors to web sales growth in Q1 included new gift centers for Valentine's Day, Easter and Mother's Day, and improved customer engagement through a 20% increase in the number of product reviews since the fourth quarter, Joly said.
For the first quarter of fiscal 2015 ended May 3, Best Buy, No. 15 in Internet Retailer’s 2014 Top 500 Guide, reported:
- Domestic web sales of $639 million, up by 29.2%. Best Buy did not report Q1 2014 web sales last week, but based on current earnings data web sales in the first quarter of last year were $494.6 million.
- Total domestic revenue, including e-commerce, of $7.78 billion, down by 2.1% from $7.95 billion.
- Domestic comparable sales, including stores and e-commerce, declined 1.3%.
- International revenue of $1.254 billion declined 10.5% from $1.401 billion. Best Buy attributed the decline to a comparable sales decline of 5.8% in Canada, China and Mexico; foreign currency exchange rate fluctuations; and the loss of revenue from large-format store closures in China, partially offset by revenue from new store openings in Mexico.
- Total sales of $9.04 billion, down by 3.3% from $9.35 billion last year.
- Net earnings from continuing operations of $461 million compared with net earnings of $97 million.
- Web sales accounted for 8.2% of total domestic revenue, compared with about 6.2% last year.
E-commerce upgrades planned between now and the holiday shopping season include “improving the shopping experience by implementing an improved homepage design, a more robust and streamlined wish list, significantly richer visual and editorial content, and enhanced search and navigation capabilities,” Joly told analysts. Best Buy also will add returned products to its online assortment and enhance the online scheduling of home delivery and installation, he added.
Many of the Q1 web sales results and e-commerce site enhancements stem from the company’s Renew Blue turnaround program announced in fall of 2012, Joly told analysts.