Best Buy sees best sales gain in 7 years, but its stock takes a dive

Such is the up-and-down life of retailers these days trying to prove themselves to investors amid the formidable shadow of Amazon.com.

MINNEAPOLIS — Best Buy on Tuesday celebrated its biggest quarterly sales jump in seven years — and then its stock plummeted.

Such is the up-and-down life of retailers these days trying to prove themselves to investors amid the formidable shadow of Amazon.com.

The retailer, based in suburban Minneapolis, posted a 5.4 percent jump in comparable sales in the May-to-July period, a performance that outshined that of many other retailers. But CEO Hubert Joly cautioned analysts not to expect such big leaps to be “a new normal.”

That admission — along with stepped-up investments in e-commerce and supply chain and concerns about a slowing of Best Buy’s profit growth — spooked investors. The company’s stock, which closed just below its record high the day before, fell 11.9 percent Tuesday to close at $55.02.

Matt Sargent, senior vice president of retail for consulting firm Magid, said Best Buy executives were trying to temper excitement since its sales in the first half of the year tend to be mostly from tech enthusiasts. The second half of the year, dominated by gift givers, is when other retailers become more promotional and Amazon becomes an especially appealing option.

“This shouldn’t be a surprise to anyone, but I think traders and the market are so jittery about Amazon that they’re overreacting,” he said.

He added that while other retailers such as Wal-Mart and Target are still figuring out their Amazon strategy, Best Buy has become seasoned at competing with the online juggernaut.

“They’re one of the best battle-tested retailers out there in terms of this Amazon challenge,” Sargent said.

During a conference call with analysts, Joly said that as part of Best Buy’s new strategic road map, the retailer is more focused on growing overall revenue rather than profit-margin rates. He added that the company will use an additional $600 million in cost cuts over the next few years to help fuel investments as it tries to further differentiate itself and widen the gap with competitors. The company said Tuesday it plans to spend $700 million in investments this year, up from its initial plan of $650 million.

“We have an opportunity-rich environment. We have momentum,” he said. “This is the time to play to win and invest.”

Investors often reward Amazon…

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