By Kavita Kumar
The (Minneapolis) Star Tribune
Best Buy displayed more confidence about the holiday season Tuesday morning by raising its forecast for the year after reporting better-than-expected quarterly results.
The improved guidance for the year reflects improved expectations for the fourth quarter, which includes the holiday, as well as the retailer’s stronger profitability in the third quarter, executives said in a statement. The company said it expects comparable sales growth of 0.5% to 3% in the holiday quarter, a fairly wide range that gives it some wiggle room to account for heavy promotions but also some potential for a higher upside.
While the retailer had signaled some uncertainty about the holidays earlier this year given tariffs and worries about a slowing economy, CEO Corie Barry said the electronics chain feels more reassured now given its most recent quarterly results as well as positive forecasts for a strong holiday shopping season by many firms such as Deloitte, PwC, and the National Retail Federation. Other indicators such as unemployment, wage growth, and consumer confidence also continue to look good.
“We now have the benefit of knowing how the (third quarter) played out and we also have the benefit of some of the smartest people in retail providing their own points of view about the consumer,” she said. “Every time you pile on a few more data points, you’re able to provide a little more certainty in your forecast.”
Growth in appliances, headphones, tablets, services and computers helped the Richfield-based retailer deliver a comparable sales increase in the U.S. of 2% in the third quarter. Those areas helped make up for sales declines in gaming and home theater. Online sales rose 15%.
“Although revenue growth rates are far from dramatic, the results from Best Buy are very respectable and underline the strength of the retailer in a competitive and sometimes challenging market,” Neil Saunders of GlobalData Retail said in a statement.
Its net earnings were $293 million, up 6% from the same period a year ago. When adjusted for one-time items, it earned $1.13 a share, which was better than the $1.03 analysts were expecting.
Heading into the holidays, Best Buy has positioned itself to be one of the stronger players in retail while others, notably department stores, have been struggling.
Best Buy has also said it will be able to get thousands of items by the next day to about 99% of its customers this holiday, matching a big investment by Amazon this year to offer its Prime members free next-day delivery on many items. Larger items such as big-screen TVs and appliances are not eligible for Best Buy’s next-day delivery offer.
Best Buy has already hosted early Black Friday sales by releasing items from its ad in advance. But it’s saving some deals for Thanksgiving Day when it will open its stores at 5 p.m., the same as it has done for the last several years.
Last month, it also relaxed its dress code to allow employees to wear jeans. Target and Walmart have also done so in the last year or two.