Best Buy just reported an unexpected jump in comparable sales, at a time when many brick-and-mortar retailers are struggling to draw shoppers to stores.
The electronics retailer had warned in March that same-store sales could fall by 1 to 2 percent during the latest period, but on Thursday Best Buy reported growth of 1.6 percent at its established locations. Analysts were expecting a 1.5 percent decline, according to Thomson Reuters estimates.
Shares of Best Buy were up more than 17 percent in Thursday morning trading on the news.
The company’s CEO, Hubert Joly, said the increase in sales benefited from the anticipated arrival of delayed federal tax refund checks, with more consumers picking up gaming and mobile products.
“We delivered a strong performance in gaming due to robust customer demand and good product allocations for the new hardware that launched during the quarter,” Joly said on Thursday’s earnings conference call.
“Second … while mobile was not a growth area due to last year’s product recall and the fact that new phones launched later in the quarter than they did last year, sales in [the first] quarter were better than we expected as new unlimited data plan offers from the carriers generated increased demand across devices.”
Best Buy added that it now expects second-quarter comparable sales to grow between 1.5 percent and 2.5 percent.
“There is little doubt that the delayed arrival of tax refunds provided buoyancy to the [electronics] market later into this quarter,” GlobalData Retail managing director Neil Saunders wrote in an email.
Nevertheless, “the impact was helpful but somewhat limited,” Saunders said. “Best Buy’s performance is down to more than just consumers temporarily having a bit more money to spend.”
One spot to keep an eye on is Best Buy’s e-commerce platform, which is being watched to see how it can keep up with Amazon.
During the first quarter, Best Buy delivered digital sales growth of more than 22 percent, implying the retailer continues to make moves to grow its audience online.
“As you see the online business grow and you see the customer demands around speed and choice continued to evolve, we do believe that over time, we need to continue to invest and make sure that we’re delivering in the ways that our customers want,” Joly said on the call with analysts and investors.
As the company shifts more revenues toward its online channel, Best Buy said it’s considering the “ongoing optimization of [its] store footprints.” The retailer has outlined the next phases of its so-called turnaround efforts, which include increasing its in-home advisory program, accelerating growth in Canada and Mexico, and finding additional ways to cut costs.
“Q1 continued the trend of Best Buy enhancing its competitive position,” Moody’s lead retail analyst Charlie O’Shea wrote in a note to clients.
“Potential performance pressure points were evident during the quarter, including delays in income tax refunds and hhgregg‘s bankruptcy and still-ongoing liquidation; however, Best Buy successfully avoided the trap of chasing low quality/margin sales,” he said.
Best Buy’s 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. Analysts were expecting earnings of 40 cents per share, according to Thomson Reuters consensus estimates.
The retailer’s revenue climbed 1 percent, to $8.53 billion, beating the average analysts’ forecast for $8.28 billion.
“I think what Best Buy has figured out is where the store actually makes sense,” versus putting consumer electronics online, Oppenheimer retail analyst Brian Nagel told CNBC on Thursday.
Best Buy has “figured out where to play” against e-commerce giant Amazon, making it a good example of a traditional retailer “really embracing online commerce,” he added.
As of Wednesday’s close, shares of Best Buy have climbed an eye-popping 57 percent over the past 12 months and are up about 18 percent for the year-to-date period.
BBY year-to-date performance