Best Buy Reports Strong Q4 Growth, Adds New Wrinkle to Store Pickup

Best Buy reported a strong fourth quarter, which included the 2017 holiday season, increasing same-store sales 9% over the previous year – when they had dipped 0.9% – and boosting online comp sales by 18%, representing one-fifth of domestic revenue.

At the same time, Best Buy announced it was shuttering its remaining 257 standalone mobile phone stores, concentrating instead on big-box and online mobile sales.

One driver of the Q4 success was Best Buy’s continued omnichannel push, CEO Hubert Joly told analysts. The company has made improvements to its buy online, pickup in store program and is testing a new app feature that lets shoppers tell associates when they’re arriving to pick up a larger item like an appliance or flat screen TV.

“From the multichannel standpoint, building on our success with in-store pickup we continue to test new and convenient ways for customers to get their orders,” Joly said.

In addition to the upgraded app, Joly said Best Buy is also testing lockers and curbside pickup solutions.

Joly said the quarter was also helped by better product availability, which was a sore spot in Q4 of 2016 that affected the holiday results.

“You may recall that last year we had both product recalls and product availability constraints across multiple vendors and categories,” Joly said. “This year, product availability was much better across the industry. And additionally, we deliberately invested in having more product in stock and available for customers.”

As for shutting down the mobile store operations, Best Buy CFO Corie Berry said it will cause a revenue hit of about $225 million in fiscal 2018. Joly said the model was a winner when it launched more than a decade ago, ahead of the first iPhone, but that was no longer the case.

“Back then the mobile phone business was in a period of rapid growth and margins were high,” Joly said. “Fast forward to 2018 and (it) has matured, margins have compressed and the cost of operations in our standalone stores is higher than in our big-box stores. We’re committed to and remain excited about the mobile phone category. We simply believe that it makes more sense for us to grow this category in our big-box stores and online.”

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