Consumers stocking up on at-home technology, boosting Best Buy quarterly revenue 33%

Early holiday deals boosted same-store quarterly sales growth to levels Best Buy has not seen in 25 years.

However, similar to concerns about other big-box stores that have seen sales surge during the coronavirus pandemic, executives at the Richfield-based electronics chain said they don't believe sales growth will continue at the same rapid pace in the foreseeable future.

Best Buy's comparable sales grew nearly 23% in August, September and October as shoppers continued to invest in at-home technology. Comparable U.S. online sales grew 174%, only trailing last quarter's record growth in online sales, the company reported Tuesday.

"We really are pleased that we were able to leverage our unique capabilities including supply-chain expertise, a very flexible store operating model and obviously the ability to quickly shift to our digital channels," said Corie Barry, Best Buy's chief executive, during a Tuesday media call. "And that is meeting what is obviously some elevated demand for the products that we sell."

The year-over-year sales and earnings growth in the quarter beat Wall Street expectations.

Best Buy reported earnings of $391 million, a rise of more than 33% from last year. Overall revenue grew 21% to $11.9 billion.

Still, the company's shares closed Tuesday at $113.54, down 7%.

The current pandemic and resulting reliance on technology for a multitude of purposes has created "a perfect storm for somebody like Best Buy," said Stephen Baker, an analyst with the NPD Group market research company. "When you are home and you need to be at home all the time … electronic products really are the only devices that solve all those problems for consumers."

Baker predicted that electronics retailers such as Best Buy will continue to see upticks in sales for the long-term.

Best Buy also serves as a "bellwether," predictive of consumer sentiment for higher-priced discretionary items, said Neil Saunders, managing director of data analytics for consulting company GlobalData.

"There is now no doubt that Best Buy will exit this year with a much stronger balance sheet," Saunders said. "What the Best Buy results also show is that rather than turning off the spending taps in the third quarter, it was full steam ahead for the American consumer."

Sales during the quarter were bolstered by "Black Friday" deals Best Buy offered in October at the same time as Amazon's Prime Day and other early holiday sales, said Matt Bilunas, Best Buy's chief financial officer.

"October sales benefited from an earlier start to the holiday season," Bilunas said.

Like many other major retailers, Best Buy stores will be closed on Thanksgiving. The stores will open at 5 a.m. on Black Friday despite the pandemic.

This holiday, though, the retailer has added a digital queue so customers who need help can wait in their cars or in less-crowded areas.

The biggest sales growth during the quarter came from computer and home-theater equipment and appliances, following similar trends seen earlier this year.

Best Buy experienced a decline in cellphone sales partly due to the timing change of new product launches.

Bilunas also said Best Buy has had to deal with inventory constraints for popular items such as large appliances and the hot new Xbox and PlayStation gaming consoles.

During the quarter, Best Buy decided to close its 41 stores in Mexico.

Best Buy also experimented with several store design and logistical changes to more efficiently fulfill online orders — and will continue to do so in coming months.

For example, 250 stores were turned into hubs to ship out significantly more orders, Barry said. The retailer will add 90 more hub stores this holiday season.

The electronics retailer also is remodeling four Twin Cities stores, reducing shoppable square footage in them to about half what they have now. The extra space will be used to support curbside pickup and ship-from-store orders.

"Normally we would not remodel any stores this close to the holiday season, but we feel it's imperative to move quickly," Barry said.

Best Buy recently extended its curbside pickup hours beyond regular store hours. In nearly all stores, pickup orders have transitioned to being exclusively curbside orders that are brought to customers' cars in an effort to reduce the number of people in stores, Barry said.

The retailer believes the digital shift in shopping will be a permanent one, and Barry said Best Buy has put itself in a position to be a continued resource even after the pandemic as consumers feel more comfortable with technology helping them in their homes.

"Customer shopping behavior will be permanently changed in a way that is even more digital and puts customers entirely in control to shop how they want. Our strategy is to embrace that reality," she said.

Demand for phone and chat help from employees has skyrocketed during the pandemic and pushed Best Buy to train hundreds of employees in how to help customers remotely.

At the onset of the pandemic, Best Buy furloughed about 51,000 employees. Last quarter, Best Buy announced about two-thirds of associates were brought back to work. Any of the remaining furloughed employees were asked to return to work as seasonal employees for the holidays, Bilunas said.

Barry also touched on the company's renewed commitment to diversity.

She said going into the future, Best Buy has set a hiring goal to have one out of three non-hourly corporate positions filled by a person of color. The company also wants to fill one out of three non-hourly positions in the field with women candidates.

Nicole Norfleet • 612-673-4495

Twitter: @nicolenorfleet