As Americans en masse moved their workplaces, and their kids’ classrooms into their homes, a lot of them decided they needed new laptops, computer monitors, printers, and wifi routers, and a lot of them bought them at Best Buy BBY.
Best Buy also saw a surge in gaming devices, as Nintendo Switch and Xbox consoles in effect became the substitute teachers while Mom and Dad worked.
The electronics chain was well-positioned to respond to that demand thanks to technology and e-commerce investments it made pre-pandemic.
Best Buy has been hit by Wall Street in the past for investments that hurt earnings, but that strategy now is poised to pay rewards going forward.
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The company also is likely to benefit from its pre-COVID-19 bet that at home health monitoring was a growing market.
Despite closing all of its stores on March 22, and shifting to a curbside-only model, Best Buy was able to retain 81% of the prior year’s sales during the last six weeks of the first quarter, “even though not a single customer set foot inside our stores,” CEO Corie Barry said in conference call with investors today as the company released its earning results.
Being able to quickly pivot to curbside pickups, and replacing in-store sales and service with video virtual consultations and digital chats reflects “heavy digital builds behind the scenes” that were in the works before the crisis hit, Barry said.
Now, she said, Best Buy is flexing the tech muscles it developed not expecting that they would be put to use in a pandemic.
While first quarter results were weaker than the prior year, Best Buy beat expectations for earnings and revenue. Its results may seem anemic compared to Walmart and Target, which got big boosts thanks to demand for grocery and household staples, and Wall Street so far today hasn’t been impressed, with the stock down almost 5% at midday, but Best Buy deserves to be patting itself on the back for its long-term vision.
U.S sales overall declined 6.7 percent due to the store closings, online sales rose 155% during the quarter, and skyrocketed from 15.4% of U.S. sales a year ago to 42.2% in the quarter that ended May 2.
On May 4 Best Buy began reopening stores, with new rules that limit the number of customers, and require customers to make an appointment for one-on-one service by a sales associate, who will accompany the customer as they browse the store.
It also has resumed in-home service calls, with new safety protocols including masks, and distance markers the service tech will use to create a border around his or her work space, to keep home owners who want to watch, or talk to the techs while they work, a safe social distance.
The fact that Best Buy was able to retain 81% of its sales during six weeks when all of its stores were closed begs the question of whether Best Buy needs more than 1,000 big box stores.
Barry addressed that question by noting that the physical stores proved to be a valuable asset for quickly fulfilling online orders during the crisis, with customers picking up same-day orders at stores, and with Geek Squad tech workers being re-deployed to make local deliveries from stores.
But, she added, if is very likely those stores will look quite different going forward, with some shifting their focus from sales floor selling to online order fulfillment and customer support.
Pre-pandemic, Best Buy bet big on senior care and in-home health monitoring with acquisitions it made, and the payoff from those investments is likely to be accelerated.
“There is significant demand for technology that will help us maintain and monitor our health at home,” Barry said. “The level of innovation in health at home is only going to accelerate from here.”
Barry called the pandemic a scenario no CEO could plan for, one of those events “for which you simply do not have a playbook.” But right now Best Buy is feeling pretty good about its pre-pandemic preparations for a new, more digital, socially distant world.
“In many ways, our current way of life, in our homes, reliant on technology, has only reinforced our belief in our strategic direction,” Barry said. “We firmly believe out strategy will uniquely position us over the long term by leveraging our unique combination of tech and touch to meet everyday human needs and build more and deeper relationships with customers.”