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Can Best Buy’s Revenue Keep Improving?



Sales trend

Best Buy (BBY) beat analysts’ revenue expectations in two of the first three quarters of fiscal 2018. The company’s revenue has grown for three consecutive quarters in a tough retail environment. Best Buy’s revenue grew 1.0%, 4.8%, and 4.2% in fiscal 1Q18, 2Q18, and 3Q18, respectively.

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Lower-than-expected Q3 revenue

In fiscal 3Q18, which ended on October 28, Best Buy’s revenue grew 4.2% to $9.3 billion lagging analysts’ expectation by 0.4%. The company’s revenue was adversely impacted by hurricanes in the United States and an earthquake in Mexico, whose combined impact negatively affected fiscal 3Q18 same-store sales growth by 15 basis points to 20 basis points. Best Buy’s same-store sales grew 4.4% in fiscal 3Q18.

Best Buy’s fiscal 3Q18 revenue was also hit by lower mobile phone revenue resulting from the delay in the launch of Apple (AAPL) iPhone X to November. This delay in the much-anticipated launch made many customers postpone their smartphone purchases and adversely impacted Best Buy’s revenue by over $100 million in the third quarter.

Rival GameStop’s (GME) sales grew about 1.5% to $2.0 billion in fiscal 3Q17 (which ended on October 28), driven by strong software sales and continued demand for the Nintendo Switch and collectibles.

Expectations from top-line growth

Best Buy expects its fiscal 4Q18 (which ends on February 3, 2018) revenue in the $14.2 billion to $14.5 billion range, compared to $13.5 billion in fiscal 4Q17. Currently, analysts expect Best Buy’s revenue to rise 6.9% to $14.4 billion in fiscal 4Q18.

For full-year fiscal 2018, Best Buy expects its revenue in the range of $41.0 billion to $41.3 billion, indicating a growth of 4.0% to 4.8% compared to last year.

We’ll discuss Best Buy’s efforts to improve its margins in the next part of this series.


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