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Best Buy (BBY) Looks Poised on Sturdy Demand, Digital Sale

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Consumer’s enhanced inclination toward technology products is an upside for Best Buy Co., Inc. (BBY - Free Report) . Increased work-from-home trends amid the pandemic also drove demand for various technology products and services, as witnessed by the company during first-quarter fiscal 2022. This specialty retailer of consumer electronics and related services is gaining from surge in digital sales. It is also focused on improving operational efficiency as well as boosting consumers’ shopping experience. Let’s delve deeper.

Encouraging Demand for Electronics

During the first quarter, Best Buy witnessed sales growth across the Domestic and the International segments, backed by strong demand for technology products and services. Within the domestic business, the company witnessed growth in demand for computing, home theater and appliances. The company’s strong supply chain, flexible store operating model and ability to shift quickly to digital have been helping it meet rising demand for products and services. Management expects such growth trends to persist and accordingly provided an encouraging comparable sales growth view for fiscal 2022.

Digital Growth

Consumers rising inclination toward digital transactions is helping Best Buy to boost online revenues. It has been focusing on improving digital capabilities, including boosting omni-channel services such as buy online, pickup in store services. Stores have continued to play an important role in the fulfillment of online sales. During the first quarter, 60% of the online sales were picked up in stores or curbside, shipped from store or delivered by store employees. The company’s Domestic comparable online sales increased 7.6%, driven by higher average order values and traffic.

For fiscal 2022, online sales are expected to contribute in the mid-30% range to Domestic sales. The company’s strong omni-channel capabilities are likely to keep driving online revenue growth. Also, it is adding new functionalities to its curbside pickup services to driving frequency, retention and personalization. Almost all its stores provide same-day delivery on thousands of products. In fact, several store locations are being strategically positioned to be able to ship out more volumes. Such well-chalked plans are likely to keep supporting the company’s online revenues. Apart from these, the company is increasing customer engagement through its mobile app.

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Other Prudent Growth Efforts

Best Buy is focused on strategic endeavors like better execution in key areas, cost containment as well as investing in people and systems. The company is progressing well with programs like Total Tech Support, which provides support for fixing computers, laptops, appliances, smart home devices and connected devices as well as technical support from Geek Squad agents. Best Buy expanded its In-Home Advisor program that includes advisors, who guide customers to select the right technology solution. The company’s loyalty program members have continued to project growth. It is also testing new store formats.

We expect such upsides to keep supporting this Zacks Rank #2 (Buy) company’s performance and help it maintain strong footing in the retail electronic products space. Markedly, shares of the company have gained 18.5% in a year compared with the industry’s rise of 50%.

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