At Best Buy Co. Inc., United States digital sales fell year over year at a faster rate than overall comparable sales. But as a percentage of total sales, online revenue still represents almost twice what it did in 2019, the retailer reported today.
For Q2 of Best Buy’s fiscal year 2023, online sales were $2.97 billion, down 14.7% compared to the previous Q2. Overall (online and offline) comparable domestic sales dropped 12.7% year over year. Q2 of fiscal 2023 ended July 30, 2022.
“As we emerge from the pandemic, it is clear that our customer shopping behavior has changed,” Best Buy CEO Corie Barry said today during a conference call with analysts. “Our online sales as a percentage of domestic revenue in Q2 was 31%, nearly twice as high as pre-pandemic.”
Barry added that “stores remain incredibly important for customers to see and touch products and get advice. In addition, they’re crucial to our fulfillment strategy.”
During Q2, she said, customers picked up 42% of Best Buy’s online sales at its stores. She said the retailer shipped another 18% of online sales from stores to customers’ homes.
“These in-store pickup and ship-from-store numbers have remained incredibly consistent for the last several years,” Barry said, “even as shipping speed and options have dramatically increased.”
Best Buy ranks No. 6 in the 2022 Digital Commerce 360 Top 1000.
Performance details
Global revenue for the quarter was $10.33 billion, a 12.8% decrease from $11.85 billion a year earlier. For the six months ended July 30, global revenue was $20.98 billion, down 10.7% from $23.49 billion a year earlier.
Net income for the quarter was $306 million, down 58.3% from $734 million for the year-ago quarter. For the six months ended July 30, net income was $647 million, down 51.3% from $1.33 billion a year earlier.
Best Buy also reported that its domestic gross profit rate was 22.0% versus 23.7% last year. Among other things, the lower gross profit rate was due to lower margins on service sales, including costs associated with the Best Buy Totaltech membership program. Other factors included lower product margin rates due to increased promotions and higher supply chain costs.
Launched last year, Totaltech offers its members benefits — including up to 24 months of product protection on most Best Buy purchases — for a $199.99 annual fee.
During the conference call, Barry said Totaltech’s growth was encouraging in Q2, but did not provide specifics.
“In Q2, nearly half of the new members joining the program were either new or lapsed customers, reinforcing how the value of this program resonates beyond our existing loyal customers,” she said.
A lot of uncertainty
“We are clearly operating in a volatile consumer electronics industry,” Barry said. “We assumed the [consumer electronics] industry would be lower following two years of elevated growth, driven by unusually strong demand for technology products and services and fueled partly by stimulus dollars.”
She said Best Buy also expected to see an impact once consumers shifted their spending back into “experience areas, such as travel and entertainment as pandemic-era lockdowns eased. But some challenges were harder to predict.
What Best Buy did not expect, Barry added was “a changing macro environment where consumers are dealing with sustained and record high levels of inflation in some of the most fundamental parts of their daily lives, like food,” Barry said.
In a note to investors, Michael Lasser, an analyst at UBS Securities, acknowledged that Best Buy faces an uncertain marketplace.
The retailer, Lasser wrote, “is focused on what it can control in the near-term while keeping sight of its strategic initiatives such as its operating model and managing profitability.”
Outlook is unchanged
Best Buy reiterated its recently lowered profit and sales forecast for the year while noting that comparable sales will be down “slightly more” in the third quarter than in the second quarter. The decline in adjusted operating income rate this quarter “will be very similar to, or slightly more than” what the company saw in the second quarter.
“Best Buy’s steady outlook suggests demand isn’t worsening,” Bloomberg Intelligence analyst Lindsay Dutch said in a report. That’s “a positive signal ahead of the key holiday selling season.”
Best Buy also withdrew its forecast for fiscal 2025, unveiled less than six months ago.
“The current macro backdrop has changed in ways that we and many others were not expecting,” Barry said during the conference call. Best Buy will provide more detail on its longer-term expectations “once we begin to experience a more stable operating environment,” she said.
For the quarter ended July 30, Best Buy reported:
- Global revenue of $10.33 billion, a decrease of 12.8% from $11.85 billion a year earlier.
- Net income for the quarter of $306 million, down 58.3% from $734 million for the year-ago quarter.
- Comparable sales declined 12.1% compared to 19.6% growth in Q2 FY22.
- Domestic revenue of $9.57 billion, a decrease of 13.1% from $11.o1 billion last year, primarily driven by a comparable sales decline of 12.7%.
For the quarter ended July 30, Best Buy reported:
- Global revenue of $20.98 billion, down 10.7% from $23.49 billion a year earlier.
- Net income of $647 million, down 51.3% from $1.33 billion a year earlier.
- Domestic revenue of $19.46 billion, down 10.9% from $21.85 billion a year earlier
Percentage changes may not align exactly with dollar figures due to rounding.
Bloomberg News contributed to this report.
Sign up
Stay on top of the latest developments in the ecommerce industry. Sign up for a complimentary subscription to Digital Commerce 360 Retail News.
Follow us on LinkedIn, Twitter and Facebook. Be the first to know when Digital Commerce 360 publishes news content.
Favorite