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What Drove Best Buy’s Revenue in Fiscal 2Q18?

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Higher revenue

Best Buy (BBY) exceeded analysts’ revenue estimates for the second consecutive quarter in fiscal 2Q18, which ended on July 29, 2017. The company generated revenue of $8.9 billion in fiscal 2Q18, surpassing the consensus analyst estimate of $8.7 billion. Despite challenging conditions in the retail market, Best Buy’s fiscal 2Q18 revenue rose 4.8% on a year-over-year basis.

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Growth drivers

Best Buy’s revenue growth was primarily driven by same-store sales growth of 5.4% in fiscal 2Q18. This strong same-store sales growth was a result of higher-than-expected demand for technology products.

Revenue from the company’s Domestic segment rose 4.9% to $8.3 billion in fiscal 2Q18. This growth was driven by same-store sales growth of 5.4%, partially offset by the impact of the closure of 11 large format stores and 42 Best Buy Mobile stores. Merchandise categories that performed well in the quarter included computing, wearables, smart home, mobile phones, and appliances. Sales of tablets continued to be weak in the quarter.

The domestic segment’s online comparable sales rose 31.2% to $1.1 billion in fiscal 2Q18. This impressive growth was attributable to higher conversion rates and improved traffic.

Best Buy’s International segment’s revenue rose 3.7% to $668 million in fiscal 2Q18. The segment’s same-store sales growth of 4.7% in fiscal 2Q18 was partially offset by the 220 basis points of adverse impact of currency headwinds.

Specialty retailer GameStop (GME) reported a 3.4% rise in its sales to $1.7 billion in fiscal 2Q18. The increase in the company’s fiscal 2Q17 sales was a result of strong growth in new hardware sales owing to the continued demand for Nintendo Switch.

Guidance raised

Following strong fiscal 2Q18 results, Best Buy now expects its full year fiscal 2018 revenue to grow by about 4.0%. The company previously expected revenue growth of 2.5% for fiscal 2018. The company believes that the upgraded guidance will be supported by the continued favorable industry as well as consumer momentum and new product launches.

The next part of this series will focus on Best Buy’s fiscal 2Q18 margins.

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