Best Buy’s Growth Is Crimped by Product Shortages

Date: Wednesday, August 26, 2020
Source: The Wall Street Journal

Online sales more than tripled during summer, but executives said demand for some items outstripped supplies

Best Buy Co. BBY -0.50% ’s online sales surged in the latest quarter as consumers bought laptops, appliances and other items that help them work, learn and cook from home, but executives said product shortages crimped the gains.

Consumers have reported shortages or delays trying to order everything from Google’s Chromebooks to Maytag freezers. A search Tuesday on Best Buy’s website showed many chest freezers are sold out or unavailable in its Northeast stores.

“The stronger-than-anticipated demand as we opened our stores for shopping resulted in more constrained product availability than we expected,” Chief Executive Corie Barry said on a conference call to discuss quarterly results.

Best Buy shares closed 4% lower Tuesday. The shares had doubled from their March lows and were trading near all-time highs heading into the earnings release.

Like some other big-box retailers, Best Buy used curbside services and e-commerce orders to offset lost business from temporary store closures amid the Covid-19 pandemic. Total revenue rose 3.9% from a year earlier.

Online sales for the quarter ended Aug. 1 more than tripled in the U.S. to a record $4.85 billion on a comparable basis, representing 53% of the region’s sales. In the same quarter of last year, online sales were 16% of Best Buy’s U.S. business.

Best Buy stores were open only by appointment for the first six weeks of the quarter. Initially, there was strong demand for computers and tablets as millions of people and students stayed home.

Consumers also bought entertainment products such as game consoles, though their limited availability tempered sales, finance chief Matt Bilunas, said. Declines in mobile phones and digital-imaging products also offset sales growth, he added.

As stores opened more broadly for shopping, Ms. Barry said the company sold more large appliances, home-theater items and other products that customers can assess themselves in the store.

Ms. Barry said sales of digital-health, fitness and outdoor products also rose. “While still relatively small categories from a revenue standpoint, they are extremely relevant in today’s environment,” she said.

To address the higher demand, Best Buy said it had recalled about two-thirds of the employees it had furloughed during the spring. The company in mid-April furloughed about 51,000 of its 125,000 full- and part-time workers.

Overall, the retailer said total second-quarter sales rose to $9.91 billion, compared with $9.54 billion in the year-earlier period. Analysts polled by FactSet were looking for $9.73 billion. Domestic comparable sales rose 5% as lost store sales offset much of the online gains.

Executives said sales in the first three weeks of August were running 20% above last year but they cautioned they expect the growth rate to slow over the rest of the quarter, which includes the traditional back-to-school shopping season.

Best Buy reported net income of $432 million, compared with $238 million in the year-earlier period. After adjustments, earnings were $1.71 a share. Analysts were looking for adjusted earnings of $1.04 a share.

 

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