Best Buy net income rises in Q2 after website improvements and cost cutting
August 20, 2013 | The Associated Press | Comments
Best Buy‘s net income rose sharply in Q2, as the struggling electronics retailer slashed costs and worked to make its website more competitive.
Shares of the specialty electronics company were up 10.5% at $33.97, marking a two-year high.
Best Buy Co., which operates in Canada under both the Best Buy and Future Shop banners, has been shuttering underperforming stores and revamping others to offset tough competition from discounters and online retailers.
Under CEO Hubert Joly, the company has instituted a price-matching policy, opened more in-store areas for manufacturers such as Apple and Samsung and invested more to train employees.
Such measures are intended to prevent showrooming, which is when people go to stores to browse products but then shop online for lower prices. (GroupM Next and Catalyst put out a study earlier this year that showed the potential impact on Canadian brick-and-morter retailers.)
In a conference call with analysts, Joly noted the various measures Best Buy has taken to make its website more competitive, such as an improved search platform and more product reviews by customers. He said that product reviews are a “powerful tool” for helping attract customers. “We expect to quadruple the number of reviews we have on our site by year-end,” Joly said.
Looking forward, he said the site improvements will continue with measures such as better site navigation and the introduction of new product buying guides in time for the critical holiday season.
In a phone interview with the Associated Press, Joly also expressed the company’s commitment to offering the lowest prices. “Our goal is to be price competitive, it is table stakes,” he said.
Notably, online sales rose 10.5% for the period. Meanwhile, revenue in stores open at least a year slipped 0.6%. But that slip is much better than the 3.3% decline last year at this time.
“The sales number is even more impressive considering Best Buy’s entirely new website won’t launch until 2014, leading me to believe that price matching, and advertising of price matching, is closing the price perception gap with Amazon,” wrote Belus Capital Advisors CEO Brian Sozzi.
Joly noted that the company has also made “measurable progress” in declining operating margins.
The company in the U.S. earned $266 million, or 77 cents per share, for the period ended Aug. 3. A year earlier it earned $12 million, or 4 cents per share.
Overall revenue fell slightly to $9.3 billion, down from $9.34 billion last year, but better than the $9.13 billion that analysts expected.
International operations totalled $1.5 billion, down 2.9% — mostly because of the closure of 15 large-format stores in Canada last year. In addition, comparable-store sales were down 1.8% due to lower demand for consumer electronics and competitive pressure in Canada, partially offset by higher demand in China.
Best Buy Canada recently launched a back-to-school campaign aimed at novice tech consumers.