Volume Increase for Best Buy Co Inc (NYSE:BBY) Powered By Domestic Revenue Growth

Best Buy Co Inc (NYSE:BBY) reported domestic sales growth after 10 quarters of decline. The company’s domestic revenue increased 2.3% to just under $8 billion during 3Q15 ended November 1, 2014. The growth was primarily attributed to 3.2% comparable sales growth.

Total revenue increased marginally to $9.38 billion during 3Q15 as compared to $9.32 billion during 3Q14. The company posted better than expected total same-store sales at 2.2 percent, outperforming consensus estimate of 2% decline.

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Earnings and Cost Reduction

Best Buy Co Inc (NYSE:BBY) posted better than expected net income of $107 million or $0.3 per share during 3Q15 as compared to $54 million or $0.16 per share in 3Q14. The earnings growth is certainly attributed to revenue growth and Renew Blue Cost Reduction Initiatives aimed at facilitating the consumer electronics chain back to the growth trajectory. The gains were partially offset by ongoing competitive pressure on gross profit rate and strategic pricing investments.

Best Buy Co Inc (NYSE:BBY) has saved total of $965 million in annualized cost reductions since implementation of this program. Since 2Q15 earnings release, the company achieved $65 million in cost reductions due to supply chain efficiencies, lower costs of returns and damages and improved efficiency in the U.S. and Canada.

Concerns and Outlook

Best Buy Co Inc (NYSE:BBY) continued to struggle with its International business where revenues declined 8.4% YoY to $1.39 billion. The decline was attributable to 3% decline in comparable sales and negative impact of store closures in China and Canada. Gross profit rate declined 50 basis points to 20.7% during 3Q15.

Given the increasing dominance of online retail space and sales decline for electronics devices, the company projected its 4Q14 revenue and comparable sales to remain near flat. However, Best Buy Co Inc (NYSE:BBY) is expecting moderate increase in gross profit rate during the current quarter. The company is looking forward to leverage its holiday plan based on its prior-year learning. The plan includes several customer-centric changes, more inspirational gifting and promotional strategies.

About the Author

Adam is a staff reporter for US Markets Daily Publications & Media, covering foreign affairs and domestic policy.

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