REUTERS - Best Buy Co Inc reported another strong quarter of same-store sales on Tuesday, but shares of the No.1 U.S. consumer electronics retailer fell after it cautioned that the performance should not be seen as a “new normal.”
Best Buy’s shares, which hit a record high last week, were down 11 percent at $55.60 despite the company lifting its annual revenue forecast.
Best Buy’s sales at established stores rose 5.4 percent in the second quarter ended July 29, handily beating analysts’ average expectation for a 2.1 percent increase, according to Consensus Metrix.
Chief Executive Hubert Joly, however, said on a post-earnings call that he did not expect comparable sales to continue to grow at a mid-single-digit rate, but expected a 2 percent increase instead for the rest of the year.
The company also warned its strong second-quarter results do not necessarily signal a similar performance in the crucial holiday quarter ending January, due to reliance on launches of new products, whose availability can often be unpredictable.
Best Buy last year blamed the recall of Samsung’s flagship Galaxy Note 7 smartphone for the surprise decline in its same-store sales in the holiday quarter.
Best Buy is typically cautious about its expectations for the holiday quarter, David Schick, an analyst at Consumer Edge Research said.
Schick also noted that Best Buy’s stock had declined following results in past quarters even as the retailer’s earnings comfortably beat Wall Street estimates.
“Simply put, we think this is a typical Best Buy over-reaction,” Schick said of the stock’s decline on Tuesday.
Best Buy has tried to turn itself around by closing underperforming stores, improving customer service and most importantly, matching Amazon.com Inc’s low prices.
Those efforts have helped the company beat analysts’ estimates for sales in six of the past eight quarters, a performance unmatched by other electronics retailers such as hhgregg and RadioShack, which have gone bankrupt.
Best Buy now expects full-year revenue growth of 4 percent, compared with an earlier forecast for a 2.5 percent increase.
On the impact of Hurricane Harvey on Best Buy’s business, Chief Financial Officer Corie Barry said it was “nearly impossible” to predict at this stage.
Excluding one-time items, Best Buy earned 69 cents per share in the second quarter, beating analysts’ estimates of 63 cents, according to Thomson Reuters I/B/E/S.
Net sales climbed 4.8 percent to $8.94 billion. Analysts had expected $8.66 billion.
Reporting by Vibhuti Sharma and Gayathree Ganesan in Bengaluru; Editing by Sai Sachin Ravikumar