WMT Walmart Inc

By Paul Ziobro and Anne Steele 

Best Buy Co. posted higher third-quarter sales, helped by continued improvement in its online business, though recent recalls of Samsung products will weigh on its performance in the holiday quarter.

The electronics chain estimated that recalls of the Samsung Galaxy Note 7 smartphone and the brand's washing machines will dent sales by $200 million in the current quarter. Best Buy Chief Executive Hubert Joly said customers accustomed to the Galaxy Note's large screen size and software are electing to not upgrade their phones to other models.

"The customers that would have got the phone are waiting. Many of them are very loyal to the form factor," Mr. Joly said on a conference call.

As a result, Best Buy forecast comparable store sales -- which include online sales and stores open for 14 months -- will come in between a 1% fall and a 1% rise in its fourth quarter.

Still, the results topped Wall Street forecasts, as did its profit outlook for the fourth quarter. Best Buy shares were up 7.8% at $43.63 late Thursday morning.

Samsung released the Galaxy Note 7 in August, but not long after reports of overheating batteries emerged, raising safety concerns and eventually causing the company to recall the phone and to stop production of the model entirely. The Korean manufacturer has said the fiasco will result in at least $5 billion in losses for the company.

The vast majority of smartphones are sold through the nation's wireless carriers, but Best Buy accounts for about 10% of the U.S. market, according to Consumer Intelligence Research Partners.

The chain's results provide yet another positive glimpse of the consumer ahead of the key holiday-shopping season. Retailers including Home Depot Inc., TJX Cos. and Wal-Mart Stores Inc. all reported higher sales in the third quarter, while the Commerce Department recently said that total retail sales logged the strongest two-month stretch in the last two years.

In gearing up for the holiday homestretch, Best Buy is investing more to staff employees in such categories as wearable technology and virtual reality, and in the area where shoppers pick up online orders in stores. Mr. Joly played down moves by Target Corp. and Wal-Mart to add specialized staff in stores to assist electronics shoppers.

"We have a competitive advantage based on the breadth of the assortment in stores, the quality of merchandise and the training that we have," he said.

Moody's analyst Charlie O'Shea said the increase in revenue during a highly promotional quarter "indicates that Best Buy is continuing to be disciplined on price."

While the Samsung Galaxy Note 7 recall issues will be a drag on the current period, Mr. O'Shea said: "Best Buy will be able to overcome these and have a strong holiday and overall fourth quarter, driven in large part by continuing online acceleration."

For the October period, Best Buy said its U.S. revenue rose 1.3% driven by comparable sales growth of 1.8%, topping the 1% growth it had forecast. Domestic online revenue surged 24% owing to increased traffic, higher average orders and better conversion rates.

In its much smaller international segment, revenue increased 3.3%, driven by growth in Canada and Mexico and partially offset by foreign currency exchange.

Over all, Best Buy profit rose to $194 million from $125 million a year earlier. Revenue edged 1.4% higher to $8.95 billion.

Write to Paul Ziobro at Paul.Ziobro@wsj.com and Anne Steele at Anne.Steele@wsj.com

(END) Dow Jones Newswires

November 17, 2016 12:01 ET (17:01 GMT)

Copyright (c) 2016 Dow Jones & Company, Inc.