Retailer Best Buy posted strong sales of mobile phones, appliances, and smart computing products as it showed in its financial results that store chains can still thrive as shoppers buy more online, but its stock price fell as it failed to update its guidance for the year.
Anne D’Innocenzio and Damian Troise of the AP had the story:
The nation’s largest consumer electronic was also buoyed by stronger consumer confidence in reporting first-quarter revenue and profits that beat Wall Street estimates. Sales at established stores rose 7.1 percent.
Still, Best Buy shares fell nearly 7 percent Thursday as investors were disappointed that the company didn’t raise its full-year financial outlook.
Only a few years ago, naysayers were writing Best Buy’s obituary. But the Minneapolis-based company has surprised investors with its resilience.
Best Buy has improved the store experience, allowing shoppers to test new technology. It’s invested in price matching and offers speedier delivery options.
It’s also been expanding its tech support services, hoping to deepen its relationship with shoppers. That includes a free service in big cities where salespeople visit customers at home to make recommendations on TVs, setup and more. It also just launched a service that costs $199.99 a year that offers unlimited Geek Squad technical support and many other services.
Paul R. La Monica of CNNMoney.com reported that investors may be worried about competition with Amazon.com:
Best Buy chief financial officer Corie Barry noted during a conference call with analysts that investments in its supply chain and increased transportation squeezed the company’s profit margin. Higher transportation expenses have hurt big retailers lately because of a trucker shortage.
Investors may also be worried about how much Best Buy and other retailers are spending to bolster their digital operations to keep up with Amazon.
Best Buy’s stock has been on a tear lately. Before its drop on Thursday morning, Best Buy was up more than 10% in 2018 and nearly 50% in the past 12 months. Best Buy is not far from its record high.
Yup. Record high. That’s not a misprint. Despite competition from Amazon (as well as Walmart, Target and other big box retailers that sell phones, TVs, and video games) Best Buy has been thriving.
Michael Sheetz of CNBC.com reported that investors were upset that the company did not update its guidance for the year:
Best Buy stock fell 6 percent in premarket trading Thursday after the company did not provide an update to its full year forecast, despite reporting better than expected first quarter results.
“At this time we are not updating our full year fiscal 2019 guidance provided at the start of the year,” Best Buy CFO Corie Barry said on a call with investors.
The technology retailer’s shares initially turned positive after its first quarter earnings of $0.82 beat Wall Street’s estimates by 8 cents. Best Buy’s stock quickly reversed course, however, and fell steadily throughout the company’s conference call.
“Genuinely, there is not more to read into” about Best Buy not raising its full year forecast, Barry said. “I know we did it last year. We just felt like there’s so much of the year still in front of us.”