Best Buy on Thursday reported better-than-expected same-store sales for the fourth quarter of fiscal 2018, saying it saw stronger sales in gaming and a more “favorable competitive environment” through the holidays.
The electronics retailer has been investing in customer service, lowering prices and getting to a leaner real estate portfolio. Meanwhile, some of its less-successful peers including Circuit City and RadioShack have been forced to file for bankruptcy, clearing the way for Best Buy to amass an even larger share of the market.
The company’s stock jumped more than 4 percent Thursday morning on the news.
Best Buy’s net income dropped to $364 million, or $1.23 per share, from $607 million, or $1.91 a share, a year earlier during a quarter that included an extra week. The company said new tax legislation reduced earnings per share by $1.17.
Excluding one-time items, Best Buy earned $2.42 a share, 38 cents higher than expectations in a Thomson Reuters analyst survey.
Revenue climbed to $15.36 billion, while analysts were calling for sales of $14.51 billion.
The important same-store sales metric was up 9 percent overall, while analysts were calling for growth of just 2.9 percent.
“Customers are responding very positively to our Best Buy 2020 strategy,” CEO Hubert Joly said in a statement.
Best Buy’s 2020 plan includes finding new sources of revenue that aren’t so dependent on product sales. This includes marketing services around connected homes, building its Geek Squad and in-home advisor network and expanding outside of the U.S.
The impressive results speak “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. “On the online front, Best Buy has eclipsed the 20% of total sales threshold, which is a clear indication of multi-channel strength.”
Meanwhile, the company told employees Wednesday it would be closing its roughly 250 mobile phone stores in the U.S. by June.
Joly wrote in an internal memo that the business model — stand-alone stores for phones and accessories — isn’t as profitable as it once was. The company will instead focus on selling those devices inside its existing bigger-format locations.
“This format has obviously run its course as Best Buy continues to enhance its large-format stores,” O’Shea said. It “reflects the constant reassessment of physical store needs that successful retailers are undertaking in this secularly-shifting environment.”
Best Buy said Thursday it expects to incur as much as $65 million in pretax charges from the closures, which could trim its earnings per share by 14 cents to 17 cents in the first quarter of 2019.
Looking to the full year, Best Buy said it expects same-store sales to climb as much as 2 percent. Revenues should fall within a range of $41 billion to $42 billion, while earnings per share are forecast to fall between $4.80 to $5.
The company’s shares have climbed about 7 percent this year.