Minneapolis — Holiday 2014 proved relatively merry for Best Buy, but the No. 1 CE retailer warned that the going may be tough in the new year.
Worldwide revenues rose 2.1 percent to $11.4 billion for the nine weeks, ended Jan. 4, and comp sales increased 2.5 percent, the company said. The results exclude its Five Star retail chain in China, which is being sold.
In the U.S., revenue rose more than 4 percent to $10.1 billion, and comp sales increased 3.4 percent — including a 0.8 percent lift from mobile carriers’ new installment billing plans — vs. a year-ago gain of 0.9 percent.
Online comps rose 13.4 percent, compared to a 23.5-percent hike for Holiday 2013.
Most of the holiday growth was fueled by large-screen TVs and higher-priced mobile phones, which helped offset declines in tablets and sales of services, Best Buy president/CEO Hubert Joly said. He also attributed the higher-than-expected holiday gains to “a compelling merchandise assortment, strong multichannel execution, and a more favorable year-over-year macroeconomic environment.”
Specifically, the company benefitted from its investments in inventory availability; mobile phone installment billing; supply chain, including faster delivery; and more effective and relevant marketing, he said.
The latter positioned Best Buy under the holiday value proposition of “Expert Service, Unbeatable Price.”
Joly attributed the double-digit online comp gains to higher conversion rates and increased traffic, with more than half of the sales growth coming from shipped-from-store fulfillment.
He pegged slower online growth to the prior-year launches of the ship-from-store capability and the PS4 and Xbox One gaming platforms, as well industrywide declines in tablets.
Looking ahead, Joly and his chief financial officer Sharon McCollam forecast what could be a challenging year for the chain due to deflationary pricing; weak demand for legacy CE categories and extended warranties; volatile exchange rates; and increased investments in incentive compensation and customer-facing growth initiatives that will pressure operating income.
Absent the holiday excitement around high-profile products, McCollam is projecting consolidated comps to be flat to negative low-single digits for the first half of the new fiscal year, excluding the positive impact of the installment billing mobile plans.
The company will report its fourth-quarter and full 2015 fiscal-year earnings in March.
