By Nandita Bose
NEW YORK (Reuters) – Best Buy Co Inc
The No.1 U.S. consumer electronics retailer benefited from the exit and decline of some competitors such as RadioShack and HH Gregg Inc, which filed for bankruptcy and closed hundreds of stores, and tumbling sales at Sears Holdings Corp
The retailer continued to gain market share during the fourth quarter and benefited from strong customer demand and improved product availability, Chief Executive Hubert Joly said on an earnings conference call.
“Last year, we had both product recalls and product availability constraints across multiple vendors and categories,” Joly said. “This year… we deliberately invested in having more product in stock and available for customers.”
Mobile phone sales were boosted by Samsung Electronics Co Ltd’s <005930.KS> Note smartphone, which the U.S. retailer was unable to sell last year due to a recall.
Shares were up 2 percent at $74.05 in early trading, after surging more than 5 percent before the market opened.
Sales at established stores jumped 9 percent in the fourth quarter ended Feb. 3, triple the average estimate of analysts for a 2.9 percent increase, according to Consensus Metrix.
The company’s revenue grew 14 percent to $15.36 billion, beating estimates for $14.5 billion.
“The roughly $2 billion overall revenue increase speaks to the strength of Best Buy’s brick-and-mortar footprint, as well as reinforces our view that consumers still value the store experience,” said Moody’s retail analyst Charlie O’Shea.
Best Buy has tried to turn itself around by matching e-commerce giant Amazon.com Inc The performance continues to be a reversal for a company that had struggled with plunging sales and shrinking profit about six years ago as consumers browsed at brick-and-mortar stores but made purchases online, a practice called showrooming. Online sales jumped 17.9 percent in the U.S. from a year ago, accounting for $2.8 billion of business in the quarter, or about 20 percent of Best Buy’s total revenue.
On Wednesday, the company said it would shut 250 small mobile phone stores in U.S. malls as it looked for ways to operate more profitably and turn around its business amid intense competition.
Best Buy expects to incur as much as $65 million in pretax charges from the closures, which could trim its earnings by between 14 cents and 17 cents a share in the first quarter of 2019.
The cost of implementing these changes is primarily related to terminating store leases, and the company expects that most of these charges will be recorded in the first quarter of 2019.
The Richfield, Minnesota-based company’s net income fell to $364 million, or $1.23 per share, in the quarter, from $607 million, or $1.91 per share, a year earlier, hurt by charges from the new U.S. tax reform. Excluding these charges, earnings were $2.42 per share. Analysts had expected earnings of $2.04 per share, according to Thomson Reuters I/B/E/S.
Best Buy said it expects comparable sales for the full fiscal year 2019 to be flat to 2 percent higher, and diluted earnings per share to grow between 9 percent to 13 percent helped by a lower tax rate. It paid a one-time bonus of $1,000 to full-time store workers and corporate employees, and a $500 bonus to part-time store workers.
(Editing by Bernadette Baum)
