Best Buy shares saw a massive upswing on Wednesday as the company announced its Q4 earnings report, well-above analysts’ expectations.
Pumping its profits was its selection of wearables, smart home devices, and the unstoppable popularity of free game Fortnite driving demand for gaming consoles and accessories throughout the holidays.
Best Buy Knows How to Adapt and Survive
With many analysts pointing to a crisis in retail in the U.S., large name brands have been folding like a deck of cards. Bankruptcy filings in 2018 included Toys ‘R’ Us, and the 126-year-old Sears, the original ‘everything store’, closing its doors for good.
Giant retailers like these have been slow to adapt to the wave of online shopping. They were unable to keep pace with the likes of Amazon providing free delivery, fast delivery, and without the need to go instore and wait in line.
Retail in the U.S. is in crisis. WSJ wants to know: Has your community lost a popular store in the past year? https://t.co/7e2mA22GgD
— The Wall Street Journal (@WSJ) June 7, 2017
Mainstreets and malls across the land have become little more than ghost towns with empty stores behind faded facades. So how did Best Buy manage to buck the trend? Unlike Toys ‘R’ Us or Sears, Best Buy wasn’t up to its eyeballs in debt. It was able to stay nimbler and invest in its infrastructure.
While customers at Sears stores were met with fewer employees, fading wallpaper, and aging stores, Best Buy customers experienced a clean and modern shopping experience.
Moreover, the company’s CEO Hubert Joly recognized the importance of online shopping to his customers. Between 2012 and 2018, online sales accounted for some 16 percent of all revenue. This is a much higher figure than most retailers.
Working with Rather than Against the Competition
Best Buy took a risky move by promising to price match Amazon. However, Joy also decided to work with rather than against the competition.
He allowed brands like Apple, Amazon, and Samsung to open up mini-boutiques inside his stores. This was a win-win all around, saving the online giants from opening up their own stores–and allowing Best Buy to “piggyback” off their success.
Rather than ax employees left and right, the Best Buy ‘Geek Squad’ is well-known for helping out customers with their technical issues. Now they even go out to customers where they live and help to set up their appliances.
Best Buy offers its customers something that online retailers cannot, by going the last mile. Joly said:
Our customers are noticing the improved experience we provide them as they interact with us digitally, in stores or in their homes.
In fact, rather than cut jobs, Best Buy has seen employee turnover fall from 50 to 30 percent as the company invested in training and further human resources initiatives.
Staying Ahead of the Curve
It’s this ability to stay ahead of the curve, adapt, offer something that other stores can’t and deliver customers a reason to visit the store that has kept Best Buy afloat and even thriving amidst a retail meltdown.
And it allows the company to reap in the benefits that Fortnite’s popularity provides. Customers want to go to the store with comfortable facilities and a modern feel to buy the products they need for the video game.
Best Buy’s Stock Continues to Climb
Best Buy’s stock climbed by as much as 16 percent on Wednesday afternoon, before closing the day some 14.21% up.
— Reuters (@Reuters) February 27, 2019
This bucks a downward trend throughout much of 2018. However, despite a few bumps in the road, the company has now reported same-store sales gains for eight consecutive quarters.
Better-than-expected Q4 earnings clearly show that Best Buy’s investments in its employees and infrastructure are paying off. The retailer has a hopeful outlook for fiscal 2020, with an earnings per share call between $5.45 and $5.65–assuming that tariff prices remain consistent at 10 percent. Some things remain outside of Joly’s control.