Best Buy posts better-than-expected December sales
Melissa Levy
Star Tribune
Published Jan 10 2002
Best Buy Co. Inc. on Wednesday reported
better-than-expected December sales, as shoppers flocked to
the Eden Prairie-based consumer-electronics chain during the
holidays for the latest digital products and video games.
Sales at Best Buy stores open more than a year, known as
same-store sales, increased 6.2 percent for the five-week
period ended Jan. 5 compared with a year ago. (Same-store
sales would have been up 9.2 percent if not for a fiscal calendar
shift that meant fewer pre-Christmas shopping days this year.)
The chain had expected its monthly same-store sales to
increase in the low single digits, said Brad Anderson, Best Buy's
vice chairman, president and chief operating officer.
Among the December surprises: customer traffic remained
strong in the days after Christmas, perhaps because the retailer
sold many more gift cards than it did in the previous holiday
season, Anderson said. Also, same-store sales of appliances
posted a double-digit increase.
Best Buy's total sales -- which include newer stores and the
Musicland, Future Shop and Magnolia Hi-Fi divisions --
jumped 43 percent to $3.86 billion last month.
"We're very well-positioned going into the balance of the
fourth quarter," Chairman and CEO Richard Schulze said
Wednesday during a conference call with analysts from the
Consumer Electronics Show in Las Vegas.
Also Wednesday, the company raised its fourth-quarter
earnings guidance to $1.35 to $1.40 a share. The Thomson
Financial/First Call consensus estimate for the quarter ended
March 2 had been for a profit of $1.27 a share.
Fourth-quarter same-store sales now are expected to increase
3 percent to 4 percent, Anderson said. The company previously
anticipated that sales would be flat to up 2 percent.
Best Buy stock closed Wednesday at $75.16, up 40 cents. It had
traded as high as $77.20 earlier in the day.
Fiscal 2003 forecast
For its 2003 fiscal year (beginning March 3, 2002), the retailer
plans to open 60 Best Buy stores.
Up to 10 of those new stores could be in the New York market,
including the chain's first Manhattan location. Across the
country, the retailer plans a flagship store in downtown San
Francisco.
Best Buy plans to debut in five states before March 2003:
Alaska, Idaho, Utah, West Virginia and Wyoming.
The booming demand for digital products likely will boost Best
Buy's bottom line for the foreseeable future. Executives predict
that digital products -- such as DVD players and movies,
digital cameras and televisions -- should account for 23
percent of Best Buy's sales by the end of fiscal 2003, up from 19
percent this quarter.
"They continue to benefit from the digital products," said
analyst Matt Spitznagle of Northern Trust Corp., which owns
1.63 million Best Buy shares. "They've got a good foothold in
that sector."
Best Buy expects its fiscal 2003 earnings to increase 18 percent
to 21 percent, on total sales that could jump by as much as 20
percent. The retailer forecasts that same-store sales will rise 1
percent to 3 percent in its next fiscal year.
Best Buy's stock more than doubled last year, making it the
third-best performer in Standard & Poor's 500 index.
Circuit City also thrived
Rival Circuit City Group said it had a 10 percent same-store
sales gain for December, leading it also to raise quarterly profit
forecasts this week.
Both chains exceeded the 1 percent gain that the Bank of
Tokyo-Mitsubishi forecasts for the broader retail industry.
Most major chains, including Minneapolis-based Target Corp.,
will disclose December same-store results today.
December same-store sales at Musicland, which includes the
Media Play, On Cue, Sam Goody and Suncoast stores,
increased 3.8 percent. Total sales were up 2 percent to $414
million.
At Canada's Future Shop, December same-store sales
increased 16.6 percent, which contributed to total sales of $275
million. Best Buy plans to open 10 new stores in Canada before
March 2003.
Sales at Magnolia Hi-Fi, the Seattle-based retailer of
high-end consumer electronics, posted single-digit same-store
sales declines last month because of the recession and high
unemployment in Washington. Still, the chain could open up to
six new Magnolia stores in California before March 2003.
Best Buy stores generated total sales of $3.16 billion in
December, up 18 percent.
-- Bloomberg News contributed to this report.
-- Melissa Levy is at mlevy@startribune.com .
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