BBY Best Buy Company

By Khadeeja Safdar and Aisha Al-Muslim 

Best Buy Co.'s profit rose in the latest quarter as growing online sales of appliances and electronics offset flat sales in its stores.

The company said Thursday comparable sales increased 1.1% in the first quarter ended May 4, slower than previous periods but the ninth consecutive quarter of growth.

Best Buy Chief Executive Hubert Joly said the results reflect the success of the strategy that was put in place after he joined in 2012. "We're still in the midst of this multiyear transformation, but we like where we are and where we're going," he said on his final earnings call as CEO.

Mr. Joly recently announced he would step aside and hand over the CEO job to finance chief Corie Barry in June, making her one of the youngest CEOs of an S&P 500 company and one of the few women. He will serve as executive chairman and sit in an office across the hall from her to offer input on matters like strategy and acquisitions.

Best Buy shares on Thursday fell 3% to $66.80 in early trading. The stock was down 9% in the previous 12 months.

Results from retailers have been mixed so far this spring. Amazon.com Inc. and Target Corp. posted strong sales in the recent quarter, while Kohl's Corp. and J.C. Penney Co. clouded the outlook for the sector. Many retailers are also bracing for an increase in tariffs on goods imported from China.

Mr. Joly reassured investors about Best Buy's ability to mitigate the impact of the tariffs and said the company plans to press the Trump administration to limit the inclusion of consumer products on the next list of tariffs on Chinese imports. So far many electronics, from Apple Inc.'s smartwatches to Lenovo computers, have been largely spared.

"While we understand the list as proposed is comprised of many consumer items, including many electronics, we think it's premature to speculate on the impact of further tariffs," he said.

Best Buy has undergone a striking turnaround in the past five years, defying the fate that has befallen Circuit City, Sports Authority, Toys "R" Us and other so-called category killers. When Mr. Joly joined in 2012, the electronics retailer was struggling with plunging sales and dwindling profit as consumers browsed at bricks-and-mortar stores but made purchases on Amazon.com and other websites.

He matched prices, added services to reduce the company's reliance on new product releases and used its stores to fulfill online orders. More recently, he struck a partnership with Amazon to sell smart TVs and acquired GreatCall Inc., the maker of senior-focused devices.

On Thursday, Mr. Joly said the company has been expanding GreatCall and acquired a senior-focused health services company called Critical Signal Technologies. "Our focus is to enable seniors to live longer in their homes and help reduce their health care cost," he said.

He also said the company expanded a program that allows shoppers to pay for products in installments. The goal is to attract people who might not otherwise be able to buy computers and other big-ticket items.

In the latest quarter, growth in appliances, wearables and tablets offset weak demand in the entertainment category. Best Buy has been gaining share in some categories because of closures at Sears Holdings Corp. and other retailers.

Domestic online revenue increased 15% to $1.31 billion due to larger orders and higher traffic. The company has been investing in its supply chain to speed up delivery times.

Total revenue was flat at $9.14 billion. Revenue from GreatCall partially offset the loss of sales from the closure of Best Buy's smaller mobile-phone stores and a dozen large-format stores in the past year.

The retailer said profit in the quarter was $265 million, up from $208 million a year ago. Adjusted earnings were $1.02 a share, above the 86 cents a share analysts polled by Refinitiv were looking for.

For fiscal 2020, Best Buy reaffirmed its financial outlook, which includes the impact of the recent tariffs. The company said it still expects comparable sales to grow 0.5% to 2.5% for the full year. The retailer estimates adjusted per-share earnings of $5.45 to $5.65.

Write to Khadeeja Safdar at khadeeja.safdar@wsj.com and Aisha Al-Muslim at aisha.al-muslim@wsj.com

(END) Dow Jones Newswires

May 23, 2019 16:27 ET (20:27 GMT)

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