Online sales at consumer electronics retail chain Best Buy Co. Inc. grew rapidly and more than doubled as a percentage of total sales during the retailer’s fiscal third quarter.
Best Buy reported domestic online revenue of $3.82 billion in the quarter, which ended Oct. 31, up 173.7% from the comparable period a year earlier. Online sales increased to about 35.2% of total revenue during the period, up from 15.6% for the year-ago period, the company reported.
“We have seen elevated growth in new customers since the beginning of the pandemic. In Q3, we also saw strong growth in customers we haven’t seen in a while, who have re-engaged with us as well as sales growth from our current engaged customers,” said Best Buy CEO Corie Barry in a Tuesday conference call with analysts, according to a transcript posted by Seeking Alpha.
Sales growth “remained elevated throughout the quarter,” Barry said, as the retailer continued to benefit from people staying at home and a shift in consumer spending away from areas like travel and dining out. Also, she said October included sales from the retailer’s Prime Day-related sales and an earlier start to holiday promotions.
The retailer started the quarter experiencing supply constraints and continues to have problems keeping some items in stock, Barry said.
“While we did see our inventory positions improved through the quarter, we experienced continued inventory constraints in a number of categories which moderated our sales growth,” Barry said during the conference call. “The high level of global demand simply continue to outstrip supply in a number of categories, particularly large appliances and computing.”
Earlier this year, Best Buy closed most of its stores to customers and used them to fulfill online orders picked up curbside. Since then, it has reopened most of those locations. But it’s still encouraging customers to use curbside pickup, Barry said.
“In almost all stores, while customers are still welcomed to come in and shop freely, we have transitioned all store pickup orders to curbside pickup orders. This will help reduce the people in our stores who simply need to pick up their order and will allow more customers inside who want to shop or talk to an expert,” she said.
In September, Best Buy started using 250 stores as ship-from-store hub locations and is now adding about 90 locations for the holiday period, Barry said. She said all Best Buy stores will continue to ship online orders, but the hub locations “are positioned to ship out significantly more volume and utilize dedicated labor aimed at fulfilling orders originating online.” These locations were chosen based on their available warehouse space and proximity to carriers, she said.
As in the two previous two quarters, Best Buy declined to provide financial guidance for the remainder of the year.
“While the demand for the products and services we sell remains at elevated levels as we start the fourth quarter, it is very difficult for us to predict how sustainable these trends will be due to the significant uncertainty related to the various impacts of the pandemic,” Matt Bilunas, Best Buy’s chief financial officer said in a statement.
During the call, Bilunas explained the company faces uncertainties such as surging COVID-19 cases, the potential future government stimulus actions, the risk of continued higher unemployment and the availability of inventory. In addition, he said it’s unclear how long the current shift in personal spending away from things like dining out and travel will continue.
“From a revenue standpoint, we believe our Q4 sales growth will be positive, but we don’t expect sales trends to remain at the levels we experienced during Q3,” Bilunas said. “While our sales in the first few weeks of November have remained strong, they include the launch of the new gaming consoles from Sony and Microsoft, and also likely a pull-forward of sales from later in the holiday season. In addition, inventory constraints are expected to continue in certain key categories.”
In Q3, Best Buy completed a public bond offering of $650 million in 1.95% notes due in October 2030. The retailer says it will use the net proceeds from the sale to replace the $650 million in 5.5% notes that mature in March 2021. The retailer plans to retire the 5.5% notes during Q4 by exercising an option to redeem them at par value. Par value is the face value of a bond, which can be different from the market value. The market value of bonds may be above or below par, depending on factors such as interest rates or the creditworthiness of the issuer.
Best Buy is No. 10 in the 2020 Digital Commerce 360 Top 1000.
For the three months ended Oc. 31, Best Buy reported:
- Total revenue of $11.85 billion, up 21.4% from $9.76 billion for the comparable period a year earlier.
- Domestic revenue of $10.850 billion, up 21.0% from $8.964 billion a year earlier.
- Net earnings of $391.0 million, up 33.4% from $293.0 million a year earlier.
- Domestic comparable sales growth of 22.6% from the year-earlier period.
For the nine months ended Oc. 31, Best Buy reported:
- Total revenue of $30.33 billion, up 6.6% from $28.44 billion for the comparable period a year earlier.
- Domestic revenue of $27.89 billion, up 5.5% from $26.27 billion for the year-ago period.
- Net earnings of $982.0 million, up 23.4% from $293.0 million a year earlier.
- Domestic comparable sales growth of 7.5% from the year-earlier period.
Percentage changes may not align exactly with dollar figures due to rounding.
Bloomberg News contributed to this report
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