Skip to Content

Best Buy says it had a happy holiday, but warns of softness ahead

Best Buy Posts First Quarterly Profit In A YearBest Buy Posts First Quarterly Profit In A Year
A Best Buy store in New York.Photograph by Spencer Platt — Getty Images

Best Buy said same-store sales grew 3.4% in the U.S. over the holidays as it sold more large-screen TVs and mobile phones, although the electronics retailer also warned about sales softness in the new year.

Best Buy, which has faced a tough challenge from online retailers, on Thursday reported that results also benefited from a stronger economy in the U.S. And greater interest in televisions and mobile phones were the “primary drivers” of Best Buy’s (BBY) revenue growth, more than offsetting “significant weakness” for tablets, the company said.

Chief Financial Officer Sharon McCollam said the retailer was “pleased with the execution of our holiday plan,” noting that while third-party data signaled that consumer electronics sales were weaker for the holiday period, Best Buy reported higher sales.

The retailer also proved it was able to overcome a short blip in service on its website, which went down briefly on Black Friday. Best Buy said comparable sales climbed more than 13% for the online business for the nine-week period ended Jan. 3, bolstered by higher conversion rates and increased traffic.

Overall, the results from the U.S. business are an improvement from a year ago, when holiday sales declined. The international business remains a problem however, with same-store sales abroad slipping 3.6%, worse than last year’s 0.5% drop.

One benefit to Best Buy’s sales has been a huge lift from installment billing, a relatively new offering that allows mobile phone users to upgrade to the latest smartphone and spread their payments over time. Those plans are more costly than traditional contracts, which subsidize the cost of a new phone, but keep consumers locked into using that device for two years. Best Buy said domestic same-store sales would have risen a more modest 2.6% without the boost from installment billing.

Looking ahead, however, Best Buy struck a cautious tone. It said excitement about new mobile phone and TV offerings isn’t expected to continue at holiday levels. As a result, it sees enterprise comparable sales in the first half of fiscal 2016, excluding installment billing, to be flat to falling in the low-single digits.