Key Takeaways From Best Buy’s Q2 Earnings
Best Buy (NYSE:BBY) announced better than expected second quarter results on Tuesday, with both its revenue and earnings beating market expectations. The company reported a top line of $8.5 billion which beat consensus estimates by $130 million. Flat sales in the domestic market offset a slight decline in the international segment.
A slight decline in Best Buy’s selling general and administrative (SG&A) expenses helped the company post adjusted earnings of $0.57 per share for the second quarter, up by 16% over the last year and beating analysts’ estimates by 14 cents. The company’s stock price increased over 20% following the announcement.
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Growth In Domestic Market, E-commerce
In Q2 FY17, Best Buy’s comparable sales grew 0.8% in the domestic market, which was better than the company’s estimated flat comparable sales. In addition, the online channel delivered a second straight quarter of 24% revenue growth, driven by increased traffic and higher order values. The company’s e-commerce business amounted to 10.6% of total sales in Q2, up 200 basis points from last year. Best Buy now ships directly from its stores in many places to provide faster delivery to customers and maintain its competitive edge over other retailers.
Growth In Fitness and Home Improvement Segments
Best Buy benefited from secular tailwinds in the fitness and home improvement segments in the second quarter. The appliance segment, which includes fitness, witnessed 8% and 7% comparable sales growth in the domestic and international markets, respectively. The company’s fitness segment is expected to further benefit from the launch of new wearable products from market leaders like Apple and Fitbit by the end of the year.
Decline In Mobile Segment Continues
The company reported softness in its mobile and tablet categories, with only 0.3% of comparable sales growth in the second quarter. But we expect this to reverse going forward with new product launches. Apple is set to launch the iPhone 7 next month, and Best Buy expects it to have a significantly positive impact on sales.
Q3 Guidance
For the third quarter, Best Buy expects total revenue to be in the range of $8.8-$8.9 billion driven by domestic comparable sales growth of approximately 1%. It expects its international revenue to grow between (-5)% to 0% in the third quarter. It also expects its non-GAAP diluted earnings per share to be in the range of $0.43 to $0.47, in line with consensus estimates of $0.45 per share.
For full year fiscal 2017, Best Buy upped its earnings guidance slightly and now expects low-single-digit operating income growth over last year as compared to its earlier forecast of flat sales.
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