Best Buy Co Inc (BBY.N) shares rose 19 percent on Tuesday after the retailer reported a higher-than-expected quarterly profit, helped by stronger online sales and a housing recovery that sparked demand for items like televisions and refrigerators.
The largest U.S. electronics retailer also raised its fiscal-year earnings outlook and reported a surprise increase in sales at stores open at least a year.
The results bucked a string of weak performances in the electronics category by competitors like Target Corp (TGT.N) and Wal-Mart Stores Inc (WMT.N) and reflected Best Buy’s resilience against larger online rival Amazon.com Inc (AMZN.O).
Best Buy reported a nearly 24 percent increase in online sales, whose share of domestic revenue has risen to 10.6 percent from 8.6 percent a year earlier. It said it benefited from faster shipping and improvements in the checkout process and search functionality.
“Given the heavily promotional July environment due to Amazon’s Prime Day and Walmart’s steady diet of competing offers, Best Buy’s online results stand out,” Moody’s analyst Charlie O’Shea said. He estimated the company’s online business at about $5 billion.
Best Buy Chief Executive Officer Hubert Joly said that along with e-commerce investments, the retailer is focusing on improving employee retention and training “with a heightened focus on product knowledge and selling skills.”
During the second quarter ended on July 30, demand at Best Buy increased for items like home theaters and large appliances, categories where Target and Wal-Mart typically do not have a significant market share, according to analysts. Sales declined for mobile phones and gaming, where those rivals have a sizeable presence.
Mobile phone sales have fallen industrywide due to a dearth of new products. Best Buy Chief Executive Officer Hubert Joly said he expected demand to increase this quarter and next as scheduled product introductions draw consumers.
Apple Inc’s APPL.O long-awaited iPhone 7 is set for availability next month. Last week, Target blamed its poor performance in part on lower sales of electronics due to a drop in demand for Apple products.
Excluding special items, Best Buy’s second-quarter earnings of 57 cents per share beat the analysts’ average forecast of 43 cents, according to Thomson Reuters I/B/E/S.
Revenue rose slightly to $8.53 billion from a year earlier, snapping a three-quarter streak of declines and exceeding analysts’ estimates of $8.40 billion.
Sales at established stores increased 0.8 percent. Analysts had expected a 0.60 percent decline, according to research firm Consensus Metrix.
Best Buy said it expected low-single-digit percentage growth in fiscal-year operating income, compared with a previous forecast of “approximately flat” results.
The company gave a third-quarter profit and revenue outlook roughly in line with analysts’ estimates.
(Reporting by Nandita Bose in Chicago and Subrat Patnaik in Bengaluru; Editing by Lisa Von Ahn)