Best Buy Stock Dives 10% on Dismal Holiday Sales
Dismal holiday revenue
Electronics retailer Best Buy (BBY) disappointed investors by reporting lower sales this past holiday season. The company’s overall revenue fell 3.6% to ~$11 billion in the nine weeks ended January 2, 2016, from the comparable period of the previous year. The company attributed this decline mostly to lower mobile phone sales.
The disappointing sales report pulled down the company’s stock by 9.7% on January 14 to $26.43.
Weaker same-store sales
Best Buy’s same-store sales in the nine weeks ended January 2, 2016, fell 1.2% compared to an increase of 2.5% during last year’s holiday season. Same-store sales are an important indicator for retailers. They reflect the change in sales from existing stores in a certain period, excluding the impact of stores opened or closed. According to Best Buy, mobile phone sales were below expectations and down year-over-year. In contrast to mobile phones, the health and wearables, home theater, and appliance categories delivered strong performance. Best Buy makes up 0.2% of the iShares Russell Mid-Cap ETF (IWR).
The decline in Best Buy’s holiday sales came even after several initiatives, including the expansion of merchandise assortment and the addition of several stores-within-a-store for vendors like Apple (AAPL) and Samsung (SSNLF)(005930.KS). Best Buy’s domestic online revenue rose 12.6% in the fiscal 2016 holiday seasons compared to 13.4% growth in the previous year. Growth in online revenue was driven by a higher conversion rate.
Holiday season for peers
The global sales for GameStop’s (GME) holiday period, the nine weeks ended January 2, 2016, rose 1.8% to $2.99 billion. GameStop’s holiday same-store sales rose 4.4% in the holiday period, driven by strong sales of new video game consoles and collectibles. For December 2015, Conn’s (CONN) reported a 2.5% increase in total retail net sales on a year-over-year basis. However, the company’s same-store sales fell 5.6% in December 2015. The Consumer Electronics category’s same-store sales fell 20.5%.
We’ll discuss Best Buy’s segment performance in the holiday season in the next part of this series.
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