Best Buy Co Inc 2Q Earnings: Can’t Compete With Online Vendors

The Amazon effect continues to reverberate throughout the retail industry, and consumer electronics is no exception. Best Buy Co Inc (NYSE:BBY) reported disappointing quarterly sales Tuesday, August 25th. The electronics retailer’s second quarter revenues were lower than a year ago and below consensus analyst expectations.

The share price of Best Buy declined much as 6% to around $30.25 in morning trading after the news.

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Statement from Best Buy CEO

“We continued to see a shift in consumer behavior: consumers are increasingly researching and buying online. As a result, traffic to our brick and mortar stores continued to decline,” Best Buy Co Inc (NYSE:BBY) CEO Hubert Joly explained in the earnings conference call Tuesday morning.

Despite the weak quarter, Best Buy is still profitable. Of note, the company has more than $3.1 billion in cash and short-term investments, an increase of $1.9 billion year over year.

Best Buy victim of “Showrooming” trend

Retail industry analysts have noted for some time that Best Buy and other largely brick and mortar retailers have become victims of “showrooming.” That is, consumers frequently go to Best Buy stores to check out TVs, smartphones or tablets in person, but actually buy them online from or other e-tailers for a few dollars less. This showrooming trend has been gaining steam for some time, and the big box retailers have not figured out an effective counter-strategy yet.

Lack of “must have” devices

In defense of the firm’s lackluster second quarter during the conference call, Best Buy Co Inc (NYSE:BBY) Chief Financial Officer McCollam mentioned that part of the problem for Best Buy is that there aren’t very many exciting, new, must-have devices out there right now. That sounds like an excuse, but a number of analysts have made similar statements, so perhaps it is a reasonable explanation for some of the softness in sales.

Unless Apple Inc. (NASDAQ:AAPL) really blows consumers away with the upcoming iPhone 6 launch, there may not be a compelling need for that many people to buy new smartphones between now and the end of the year.