is one nimble retailer. Is its latest turn too fast?
The electronics retailer had a decent holiday quarter, though it was underwhelming compared with expectations. Comparable sales increased 12.6% from a year earlier in the quarter ended Jan. 30, less than the 14.6% jump that analysts polled by Visible Alpha had expected. Net income increased 9.5%, also below expectations. Shares were down sharply Thursday.
Some of this was telegraphed by Best Buy, which warned that a lot of holiday demand had been pulled forward to October as it started holiday sales earlier than usual. Many retailers did this to avoid supply crunches and crowded stores. Still the company had trouble keeping in stock some high-demand products such as gaming consoles, which had an impact on sales.
Unlike other pandemic retail winners, Best Buy opted to reduce its head count despite expectations that it will face more demand compared with pre-pandemic days. The retailer ended the last fiscal year with 21,000 fewer employees, or 17% less than when it started the year despite the fact that its comparable sales increased 9.7% in the same period. By contrast,
hired 90,000 associates into permanent roles last year and plans to hire more than 50,000 seasonal and full-time employees in the spring.
Best Buy’s decision stems from a belief that a significant part of sales will continue to come from online even after the pandemic has faded. For this fiscal year, Best Buy expects 40% of sales to come from digital channels, roughly the same level as last year. It is accordingly testing out different store models, including ones with reduced square footage for in-store shopping and more dedicated space for fulfilling online orders.
Going forward, Best Buy plans to assess its existing store lease renewals—there are 450 coming up for renewal in the next three years—with more rigorous standards, Chief Executive Officer
said on Thursday morning’s earnings call.
While online shopping is here to stay, nobody quite knows what consumer behavior will look like post-pandemic. The physical shopping experience clearly does matter for Best Buy’s customers: Last year, sales grew dramatically when the company reopened its stores after having shut them. The risk going forward would be that Best Buy transitions too quickly and loses its in-person appeal, which has arguably helped the retailer hold on to market share compared with formidable competitors such as
So far, Best Buy’s operational pivots have proven prescient, including its speedy closure of stores and rollout of curbside pickup early in the pandemic. This year will test its foresight once again.
Write to Jinjoo Lee at email@example.com
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