Dive Brief:
- Best Buy's pivot to curbside sales helped the electronics retailer weather the COVID-19 crisis during the first quarter, as sales fell 6.3% year over year to $8.6 billion — a smaller drop than analysts anticipated. At the same time, the retailer's online sales rose 155.4% year over year.
- CEO Corie Barry said in a press release that Best Buy's move to curbside-only in the middle of Q1 helped it retain 81% of the previous year's sales in the last six weeks of the quarter "even though not a single customer set foot in our stores."
- Best Buy's operating income fell but remained positive at $229 million, while net earnings fell 40% to $159 million yet beat the FactSet analyst consensus, according to MarketWatch.
Dive Insight:
In the retail world, Best Buy was particularly well equipped to navigate the rapid changes wrought by the COVID-19 crisis. As consumers shifted their shopping to online and contactless channels, Best Buy's years of investments in those areas helped it adapt quickly.
Moody's senior retail analyst Charlie O'Shea said in emailed comments that Best Buy's Q1 results "reflect the quality and effectiveness of its multi-channel capability." Neil Saunders, managing director for GlobalData Retail, called the relatively modest 6.3% decline "nothing short of a remarkable result" given the store closures.
Saunders described Best Buy's pivot to curbside as "a very effective option for Best Buy as it kept many associates employed, prevented a pile-up of inventory in stores, and was a far cheaper option than delivering from central warehouses." He also noted in emailed comments that the retailer was able to quickly implement the operational changes because "much of the technology and logistics were already in place," as Best Buy has been adept at store fulfillment for some years.
The retailer also benefited some from the stay-at-home orders, which drove consumers to purchase computing and gaming products as they worked and played at home. At the same time, sales of mobile phones, home theater tech, digital imaging and some services fell.
The resilience of Best Buy's sales and its omnichannel approach point to its strength even during the crisis. Analysts with Telsey Advisory Group expect the retailer to gain market share in consumer electronics and appliances "given its solid execution in stores and online, relevant and innovative products, and customer-centric offerings, such as Total Tech Support."
The analysts said in an emailed note that "we expect Best Buy to come out of this pandemic as a winner in retail, helped by its consistent market share gains, stable profitability, leading omni-channel capabilities, solid cash flow generation, healthy balance sheet, and strong management team."
