Best Buy shows signs of sales turnaround
NEW YORK —Best Buy, the beleagured electronics chain, showed signs Friday of starting to reverse declining sales by posting better-than-expected results from the critical holiday selling season.
Its shares jumped. $2, or 16.4 percent, to close at $14.21.
Best Buy has been facing tough competition from discounters and online retailers, as people browse electronics in stores and then go home to buy them more cheaply online, a practice known as “showrooming.” To combat this, it has instituted a cost-cutting program, invested in more employee training and put an online price matching policy in place during the key holiday period of November and December. The holiday quarter accounted for about a third of Best Buy’s revenue last year.
The chain said that revenue at stores open at least a year fell 1.4 percent for the nine weeks that ended Jan. 5. This figure is a key gauge of a retailer’s health because it excludes results from stores recently opened or closed.
The company’s U.S. performance was flat. While this was slightly below the 0.3 percent increase Best Buy reported a year ago, CEO Hubert Joly said in a statement that it was better than the past several quarters.
Best Buy tapped Joly in August to help reverse its slide. Joly has made management changes, including hiring CFO Sharon McCollam in November, and embarked on a turnaround plan.
Morningstar analyst R.J. Hottovy said the results show that some of Best Buy’s initiatives, such as increased employee training and online price matching, helped boost sales.
But he added that the company still faces bigger problems such as tough competition from sellers like Amazon.com and more and more vendors selling products to customers directly.
“Sales are incrementally positive, but Best Buy still faces an uphill battle with regard to its turnaround,” he said.
Best Buy said that sales were strongest among cell phones, tablets, electronic readers and appliances, while sales of entertainment, televisions and computer-related items dropped.
Another encouraging sign was that online revenue rose 10 percent for the holiday period, bolstered by better traffic, an increase that shows that the chain is managing to grab its share of online buyers as well.
“While it will be a journey with ups and downs, we are focused on becoming an increasingly effective multi-channel retailer and engaging with the tens of millions of consumers who shop us online and in-store,” Joly added.
Revenue at stores open at least a year declined 6.4 percent internationally.
Total revenue for the holiday period fell slightly to $12.8 billion from $12.9 billion.
Best Buy shares are still close to the low end of their 52-week trading range of $11.20 to $27.95. The stock hit its lowest point of the past year Dec. 27.