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Web sales drive all of Best Buy’s growth in Q2

August 23, 2016 01:13 PM
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Best Buy Co. Inc. is stepping on the gas pedal when it comes to web sales. The retail chain, which this week celebrated the 50th anniversary of its first store opening, says online sales accounted for 10.6% of its domestic revenue, up from 8.6% a year ago.

“Our e-commerce focus has evolved from the phase of building foundations to a phase of driving innovations for our customers, and we are excited about the customer experience improvements still in the pipeline yet for this year,” chairman and CEO Hubert Joly said on an earnings call this morning discussing Best Buy’s fiscal second quarter 2017 results. Best Buy is No. 20 in the Internet Retailer 2016 Top 500 Guide.

The excitement is for good reason. All of Best Buy’s revenue growth is coming from rising online sales. Best Buy says domestic online revenue totaled $835 million in the quarter, up almost 24% from the $676 million it reported a year ago. Total domestic sales, which include web sales, meanwhile, totaled $7.889 billion, an $11 million increase from a year ago and a change of less than 1%. Best Buy’s total revenue was $8.533 billion in the quarter, up $5 million from $8.528 billion.

“We saw continued positive momentum in our online sales—delivering a second straight quarter of nearly 24% growth,” Joly said. He highlighted ongoing improvements to the chain’s digital capabilities, including a more streamlined checkout process, improved search functionality, faster shipping times and live inventory visibility for stores nearby the customer. Best Buy also organized customer reviews to make them easier to read in its mobile app.

The retail chain is testing several store-based services to draw consumers to stores and interact with store personnel. Best Buy stores in Las Vegas and Atlanta are offering in-store classes on digital photography, home automation and other topics. Best Buy also is working on services that take place in person, such as an in-home adviser program and same-day Geek Squad services. Best Buy’s Geek Squad is composed of technicians who install or service consumers’ goods.

For the three months ended July 30, which is Best Buy’s fiscal Q2 2017, the retailer reported:

  • Revenue of $8.53 billion, no change from the same period a year ago.
  • Gross profit of $2.06 billion or 24.2% of total revenue, down approximately 2% from $2.10 billion and 24.6% of total revenue.
  • Online sales of $835 million, which Best Buy says is up 23.7% from a year ago. Best Buy did not disclose today what online sales were a year ago, but in an earnings statement from a year ago the retailer said it had $676 million in web sales during fiscal Q2 2016, a 23.5% change.
  • Domestic revenue, which includes web sales, totaled $7.89 billion, up 0.1% from $7.88 billion.
  • Domestic comparable-store sales were up 0.8%, down from a 3.8% increase a year ago. Best Buy includes web sales in its domestic comparable-store sales calculation.
  • International revenue (Canada and Mexico) totaled $644 million, down 0.9% from $650 million. On a constant currency basis international revenue was up 4.1%. Best Buy does not report an international comparable-stores sales metric.
  • Net income of $185 million, up 6.3% from $174 million a year ago.

For the six months ended Aug. 1, Best Buy reported:

  • Revenue of $16.98 billion, down 0.6% from $17.09 billion a year ago.
  • Gross profit of $4.21 billion, or 24.8% of total revenue, up 1.9% from $4.13 billion and 24.2% of total revenue.
  • Net earnings of $427 million, up 45.7% from $293 million a year ago.

 

 

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