Best Buy shares rose to a record high in after-hours trading Tuesday after the company said … [+]
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Best Buy BBY has proved it’s relevant in the age of Amazon AMZN . The top U.S. electronics chain also is proving the coronavirus pandemic won’t be the death knell of brick-and-mortar retail: Best Buy sales have rebounded sharply in the past month after most stores reopened.
Fiscal second-quarter-to-date sales rose 2.5% from a year earlier, led by a 15% jump since the company began reopening its stores in mid-June and allowed customers to visit most stores without making appointments first, Best Buy said late Tuesday afternoon. That reversed the 6.3% decline it posted in the first quarter that ended May 2. Second-quarter-to-date online sales through July 18 surged 255%.
Best Buy shares rose more than 4% in after-hours trading to an all-time high of $94, almost doubling since reaching a low in March. The company also said beginning Aug. 2, it will increase hourly worker wages by 4%, replacing short-term incentive compensation it had previously. It also will raise starting hourly wage to $15.
Many brick-and-mortar retailers, from clothing chain Brooks Brothers to kitchen gadgets retailer Sur La Table, have recently joined many others in declaring bankruptcy protection. Best Buy’s sales update, however, shows physical retail is far from going away despite increased online sales and sharper divides between industry winners and losers.
Benefiting from stay-at-home and remote work trend, Best Buy said computers, appliance and tablets were among the biggest sales drivers quarter to date. One sign more consumers are opting to buy in stores when given the choice: as Best Buy’s sales picked up pace since stores reopened in mid June, online sales, while still posting enviable gains, slowed to a 185% rate.
Best Buy CEO Corie Barry, having described its stores as “absolutely an asset,” said in May the retailer, with about 1,000 stores in the U.S., has seen a “pent-up demand” from customers who want to come in to stores and seek live help on such items as home office or phone products. Like many other retailers using stores as online fulfillment centers of some sorts, the company has said about two-thirds of what it sold online last quarter was for curbside store pick up or shipped to customers from stores. Best Buy also has stores in Canada and Mexico.
“Physical stores remain an important part of the (Best Buy) business model,” Oppenheimer analyst Brian Nagle has said in a report.
While one may argue Best Buy is benefiting from selling tech gadgets that naturally lends to more needs from some customers seeking in-person help, it’s not the only retailer selling non-essential things that points to consumer desire for in-store visits.
T.J. Maxx and Marshalls parent TJX, known for its no-frills shops that have stolen department stores’ market share by offering a treasure-hunt experience and bargains, noted in May its stores that had reopened were seeing “sharply higher” sales from a year earlier.
Indeed, I recently observed lines of shoppers 50 deep waiting to check out at a few T.J. Maxx stores in the city.
In another telling sign, in New York’s SoHo neighborhood on Sunday, while some stores like Zara had people outside waiting to enter because of social-distancing-led store-capacity limits, some other reopened stores remained almost empty or had shoppers there mostly to return their online purchases.
Covid19 may have hastened the end of many brick-and-mortar retailers, but the pandemic is far from being the real culprit.
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