NEW YORK -- Best Buy Co. Inc., the nation's largest consumer-electronics chain, posted fiscal second-quarter results Tuesday that handily beat analysts' estimates as shoppers picked up major appliances, large screen televisions and mobile phones.
The stock surged 12.6 percent.
Best Buy's results are benefiting from an overall shift in consumer spending toward big ticket items in the home as home values improve. Business also is being helped by an explosion of new gadgets such as the Apple watch, which will be rolled out to all Best Buy stores by the end of September. The trend in spending for the home also is playing into the hands of home-improvement operations such as Home Depot, which also reported strong second-quarter results last week.
But Best Buy's strong performance is the latest evidence that it has been able to navigate successfully a tough consumer-electronics market as it wrestles with price pressures and increased competition from online stores, notably Amazon.com.
"The home focus is very meaningful, when you think about our competitive advantages," Best Buy's Chief Executive Officer Hubert Joly said Tuesday.
Joly said the stock market rout hasn't had a measurable effect on shoppers' spending, but the company is carefully monitoring the situation. But don't expect any knee-jerk reactions from Best Buy, he said. The company isn't pulling back on merchandise offerings.
"What you're hearing from me is there's no panic" at the company, he said.
It was only a few years ago that naysayers were about to write Best Buy's obituary, questioning how such a retailer could compete in a shifting landscape where shoppers are increasingly researching products at stores and then buying online from another source for a lower price.
Under Joly, who took the helm in 2012, Best Buy has been cutting costs, revamping stores and increasing training for its sales help. It's also been rolling out services like shipping goods from all its stores, which means speedier deliveries. Joly said most online orders are being shipped within two days, and online shoppers are getting a precise delivery date. Meanwhile, Best Buy has been improving the shopping experience at the stores.
The chain also has been working with big suppliers like Samsung to develop home theater areas for shoppers to check out. It's also been catering to shoppers' increasing interest in "smart home" technology -- the ability to turn down the heat remotely, for example.
Best Buy also is staking out appliances, which accounted for 10 percent of its sales mix in the latest quarter. Appliance sales surged 20.7 percent in the latest quarter. It is highlighting appliances in specific kitchen and home areas within its stores.
Best Buy also is fortifying its relationship with Apple. Joly told investors that demand for Apple watches is so strong it will be carrying the gadget in all 1,050 of its stores and about 30 of its Best Buy mobile stores by the end of September. The Apple watch went on sale in more than 100 Best Buy stores in early August. Best Buy plans to update 520 Apple shops within its stores with new fixtures by the Christmas shopping season; it already has overhauled 350.
For the three months that ended Aug. 1, Best Buy Co. earned $164 million, or 46 cents per share. A year earlier the Richfield, Minn.-based company earned $146 million, or 42 cents per share.
Removing certain items, earnings were 49 cents per share.
The average estimate of 14 analysts surveyed by Zacks Investment Research was for earnings of 34 cents per share.
The consumer-electronics retailer's revenue climbed to $8.53 billion from $8.46 billion, also surpassing Wall Street forecasts. Ten analysts surveyed by Zacks expected $8.3 billion.
Revenue at stores opened at least a year in Best Buy's domestic business rose 3.8 percent, marking the fourth-consecutive quarter of gains.
Strength in the domestic segment helped to offset weakness in the international unit, which was hampered by store closures in Canada, ongoing softness in the Canadian consumer-electronics industry and a stronger dollar.
Online sales rose 17 percent.
Shares of Best Buy rose $3.68, or 12.6 percent, to close Tuesday at $32.95.
Business on 08/26/2015