Best Buy’s Merchandising Efforts Drive Same-Store Sales in 1Q16

Samsung Open House: Best Buy’s New Initiative to Attract Consumers

(Continued from Prior Part)

Improved same-store sales

In parts 1 and 2 of this series, we discussed Best Buy’s (BBY) stores-within-a-store initiatives. Not only have these mini stores deepened Best Buy’s relationship with key suppliers, but they’ve also helped drive the company’s same-store sales growth.

Best Buy’s same-store sales in the first quarter of fiscal 2016, which ended May 2, 2015, grew by 0.6%, beating analysts’ expectations of a decline of 0.4%. The growth resulted from higher demand for smartphones—like new models of Apple’s (AAPL) iPhone and Samsung’s (SSNLF)(005930.KS) Galaxy S6. The demand for ultra-high–definition televisions (or HD TVs) was also strong. Same-store sales for Target (TGT), which also sells consumer electronics, grew by 2.3% in the first quarter.

Best Buy’s turnaround efforts helped the company register same-store sales growth of 0.5% in fiscal 2015, which ended January 31, 2015. This growth followed four straight years of declining same-store sales. Best Buy makes up ~0.1% of the iShares Core S&P 500 ETF (IVV) and 0.4% of the Consumer Discretionary Select Sector SPDR Fund (XLY)

Best Buy’s merchandising strategy

One of the growth drivers of Best Buy’s same-store sales is its stores-within-a-store concept, which is a key component of its merchandising strategy. This approach ensures a compelling assortment of products in growth categories like mobile phones and ultra-HD TVs. To capture growth in ultra-HD TVs, Best Buy plans to open 20 additional Magnolia Design Center stores-within-a-store in 78 stores by the end of fiscal 2016. As we mentioned in Part 1 of this series, the company intends to open ~60 Pacific Kitchen & Home stores-within-a-store in fiscal 2016.

Best Buy is also working on offering a wider assortment in the connected home, health, wearables businesses. The company also plans to bring in more exclusive and private brands.

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Browse this series on Market Realist:

• Part 1 - Best Buy Targets Appliance Sales with Samsung Open House

• Part 2 - Best Buy’s Samsung Open House Attempts to Deepen Supplier Ties