Best Buy down 5.5% despite strong Q2 results and guidance boost amid high expectations: Call notes (81.66)
- Pleased with strength on financial performance
- Top line performance broad based with increases in traffic, transaction and conversion; encouraged by net promoter scores and market share gains
- Comps by segment: consumer electronics +6.8%; computing/mobile phones +4.2%, entertainment +8.5%; appliances +10.3%, services +6.6%
- Generated comparable sales growth across multiple categories, with the largest drivers being home theater, computing, appliances, gaming, mobile phones and smart home. These positive drivers were partially offset by declines in digital imaging and tablets.
- Domestic online revenue of $1.21 billion increased 10.1% on a comparable basis (vs. +12% in Q1), primarily due to higher conversion rates and increased traffic. Domestic online revenue mix increased 80 bps to 14%. Gaining share despite slowing growth online. Consumer electronics ecommerce is a mature market. Best Buy invested heavily in omnichannel (started buy online pick up I stores 10 years ago). Doubled online sales in four years
- Saw minimal share loss in TVs as the company lapped significant share gains, TV units were up and ASP was down; really like position in TV market (SNE, AMZN, ROKU)
- Fortnite related products doing well (HEAR)
- Calendar shift represents 70 bps headwind on Q3 domestic comps (tailwind in Q4)
- Sees gross profit pressure in Q3 from transportation costs and tech support roll out.
- Operating margin decline in Q3 with expansion in Q4 company
- Guidance includes tariffs, relly only impacting laundry
- Great call acquisition: enrich lives with technology; big oppty in health market; great company: profitable, growing recurring rev (900K subs, $300M in rev); significant value creation oppty with complimentary assets