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Best Buy (BBY) Gains Sheen on Strong Demand, Online Sales

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Increase in work-from-home trends has been driving the demand for various technology products. This along with consumers’ dependency on technological products for day-to-day needs has been favoring companies like Best Buy Co., Inc. (BBY - Free Report) . This specialty retailer of consumer electronics and related services has been witnessing robust demand across channels. Continued growth in online revenues backed by robust omni-channel capabilities is a key upside. Also, efficient supply chain initiatives as well as growth across domestic and retail segments have been yielding. Let’s delve deeper.

Demand Conditions are Favorable

During second-quarter fiscal 2022, Best Buy witnessed robust sales across the Domestic and the International segments, owing to strong demand for technology products and services. Solid consumer spending ability, backed by government stimulus, better wages and high saving levels is bolstering the demand. The company has been gaining from robust demand in the retail channel. Favorable market conditions resulted in lower promotional spending. Going ahead, management expects demand conditions to remain favorable for the company.

Digital Wing Looks Solid

Best Buy is focused on improving omni-channel services, such as buy online, pickup in store options. During the second quarter, as a percentage of the overall Domestic revenues, online revenues contributed 31.7%, up from 16% in the same quarter of fiscal 2020. The company’s stores are helping drive fast and convenient fulfillment of online orders. In the second quarter, it witnessed nearly 60% of its online revenues being fulfilled by stores consisting of in-store or curbside pickup, ship-from-store or employees delivering product to customers.

Best Buy is constantly conducting various tests and pilots to become a more customer-centric, digitally focused and efficient company. The company introduced an important membership pilot called Best Buy Beta last year. This encompasses unlimited Geek Squad technical support on the entire technology including 24/7 VIP access. Management plans to ramp up the program nationally across stores and online under the new name, Best Buy total tech. The company is also piloting mobile app checkout features. It is on track to launch its virtual store and develop a new digital communication platform. Such well-chalked plans are likely to keep contributing to the company’s online revenues.

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Other 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. In terms of expanding assortments, the company has been adding new products across fitness, beauty, sleep, pain management, vision, hearing and electric transportation categories. The company is also progressing well with its initiatives to remodel stores and is testing new store formats. It is on track 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 has 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.

We expect the aforementioned upsides to keep supporting this Zacks Rank #2 (Buy) company’s performance and help it maintain strong footing in the retail electronic products space. Shares of the company have gained 12.3% during the year-to-date period compared with the industry’s rise of 40%.

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Walmart Inc. (WMT - Free Report) has a long-term earnings growth rate of 5.5%. It presently has a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Costco Wholesale Corporation (COST - Free Report) , with a Zacks Rank #2, has a long-term earnings growth rate of 9.3%.

Caseys General Stores, Inc. (CASY - Free Report) , also with a Zacks Rank #2, delivered an earnings surprise of 26.1% in the last four quarters, on average.