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Smartphones and TVs Drive Best Buy’s 1Q16 Same-Store Sales

Sharon Bailey

Best Buy Manages to Get Better in 1Q16

(Continued from Prior Part)

Same-store sales growth

Best Buy (BBY) reported a 0.6% growth in its same-store sales in the first quarter of fiscal 2016, which ended May 2. This marks the third straight quarter of same-store sales growth for the consumer electronics retailer.

Best Buy’s same-store sales growth in 1Q16 resulted from continued demand for smartphones, including new models of Apple’s (AAPL) iPhone and Samsung’s (SSNLF) Galaxy S6. Same-store sales were also favorably impacted by the demand for HDTVs and major appliances.

Installment billing

Best Buy’s 1Q16 same-store sales also benefited from its installment billing process. Best Buy introduced a new installment billing plan in partnership with multiple carriers like Sprint and Verizon in fiscal 2015. The company’s same-store sales actually declined by 0.7%, excluding the favorable estimated impact of installment billing.

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According to Best Buy, its installment billing plans generate higher revenues due to higher prices for its devices. However, these plans result in a higher cost of sales due to lower device subsidies.

Initiatives to increase store traffic

Best Buy continues to implement several initiatives to increase its store traffic. For instance, Best Buy’s Camera Experience Shops provide classes for consumers who are interested in photography. The company is also expanding product training for its sales staff.

Best Buy is working to provide a compelling product selection for consumers, focused on growth categories like ultra-high-definition television, mobile devices, as well as its connected home, health, and wearables businesses. The company’s option to buy products online and pick up at the store also helps to drive in more consumer traffic.

Same-store sales of Walmart (WMT), which also sells consumer electronics alongside its huge product selection, increased by 1.0% in the comparable first quarter. Best Buy and Walmart together account for ~0.7% of the portfolio holdings of the iShares Core S&P 500 ETF (IVV) and 1.8% of the SPDR S&P Retail ETF (XRT).

Continue to Next Part

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