Article | March 17, 2017

Best Buy Sales Slide As Customers Turn Online

Christine Kern

By Christine Kern, contributing writer


Revenue missed expectations for holiday period, leading to new strategies to recover.

Faced with growing pressure from Amazon and other retailers, Best Buy has been aggressively cutting costs and investing in its web presence and services to better compete in the online world. Additionally, Best Buy rolled out dedicated spaces for 4K TVs and other high-tech electronics instore, and began using its physical stores to help speed fulfillment, according to the Pioneer Press.

Despite these efforts, and even though reported earnings that topped estimates, revenue slipped 1 percent from a year ago as same-store sales unexpectedly declined in the fourth quarter as consumers bought fewer electronic devices like gaming consoles, wearable devices and mobile phones, according to Yahoo!Finance.

One factor that had a significant impact on Best Buy sales was the Samsung Electronics Co.’s massive recall of its Galaxy Note 7 smartphone. Added to other widespread shortages in categories that ranged from tables to wearables to computing devices, CEO Hubert Joly told investors that the chain was hit hard. “While we’ve experienced constraints on product availability before, the situation felt unprecedented give how widespread these issues were,” he explained.

Amazon and Apple competition also bit deeply into Best Buy’s segment of the electronics market, especially as Amazon employed deep discounts and heavy promotion of its own lineup of devices during the holiday season to attract shoppers.

Best Buy earned $607 million, or $1.91 per share. Earnings adjusted for one-time gains and costs came to $1.95 per share, topping Wall Street expectations. But revenue fell 1 percent to $13.48 billion in the period, missing Street forecasts. For the year, the company earned $1.23 billion, or $3.81 per share. Revenue came to $39.4 billion.

For the quarter ending in May, Best Buy expects per-share earnings of 35 cents to 40 cents. That’s far short of expectations for 49 cents per share.

According to Bloomberg, these figures are driving Best Buy to re-evaluate its current operations. In light of these numbers, and the trend of the population to turn to online shopping for more of their purchases, the chain has vowed to expand its online operations, offer a wider range of higher-margin services, and to expand internationally. The company explained that a shrinking U.S. consumer-electronics industry is driving the new approach, as demand for smartphones, tablets, and video games is plateauing.