Best Buy Misses Revenue Estimates in Fiscal 3Q16

Why Best Buy Delivered Mixed Results, Subdued Outlook in 3Q16

3Q16 revenue falls

Consumer electronics retailer Best Buy (BBY) reported a worse-than-expected fall in its 3Q16 revenue. The company reported a 2.4% fall for the quarter, which ended on October 31, 2015. The company reported its 3Q16 results on November 19.

Missed revenue estimate

Best Buy’s revenue in 3Q16 came in at $8.82 billion, missing the consensus Wall Street analyst revenue estimate of $8.83 billion. The company had previously exceeded consensus analyst revenue estimates in the first and second quarters of fiscal 2016.

The company’s 3Q16 revenue fell as a 1.2% rise in the revenue of the domestic segment was offset by a 29.9% fall in the company’s international business revenue. The company’s international revenue was adversely affected by:

• closure of stores as part of the Canadian brand consolidation

• currency headwinds

• ongoing softness in the Canadian economy and consumer electronics industry

Same-store sales

Best Buy’s same-store sales increased by 0.8% in 3Q16, driven by the growth in the domestic segment in computing, major appliances, health and wearables, and large-screen televisions. The growth in these categories was partially offset by decreases in tablets, mobile phones, and digital imaging. Best Buy constitutes 0.1% of the iShares Russell 1000 ETF (IWB).

In the company’s 3Q16 conference call, Best Buy’s chairman and chief executive officer Hubert Joly stated that this was the twentieth consecutive quarter of growth in appliances. The category benefitted from the company’s growth initiatives, including in-store shops called Samsung Open House, which display Samsung (SSNLF) (005930.KS) home appliances. We’ll discuss the company’s growth initiatives in part five of this series.

Best Buy’s results reflect an overall weakness in the consumer electronics business. In the third-quarter conference call for Target (TGT) held on November 18, chairman and chief executive Brian Cornell reported a double-digit fall in same-store sales in the electronics category. On November 5, Conn’s (CONN) reported a 9.1% fall in its third quarter same-store sales for the consumer electronics category.

Continue to Next Part

Browse this series on Market Realist:

• Part 2 - Best Buy Exceeds 3Q16 Earnings Estimates Despite Lower Revenue

• Part 3 - Best Buy’s 3Q16 Margin Expansion: Analyzing the Key Drivers

• Part 4 - Best Buy’s Stock Falls Following Cautious Fourth Quarter Outlook