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Best Buy (BBY) Gains From Operational Efforts, Strong Demand

Best Buy Co., Inc. BBY has been gaining from consumers’ growing inclination toward technology products amid the pandemic. Such trends favored the company’s performance in the domestic channel during first-quarter fiscal 2022. Additionally, the company is gaining from surge in digital sales. It is also focusing on improving operational efficiency as well as boosting consumers’ shopping experience. Let’s delve deeper.

Favorable Market Conditions & Digital Strength

During the first quarter, Best Buy witnessed sales growth across the Domestic and the International segments. Management highlighted that demand for technology products and services were high in the reported quarter, thanks to the pandemic. Within the domestic business, the company witnessed growth in demand for computing, home theater and appliances. Apart from these, the company’s strong supply chain, flexible store operating model and ability to shift quickly to digital have been supporting its performance. Such upsides have been helping the company meet increased demand for products and services. Notably, strong first-quarter results as well as continued growth trends in the second quarter encouraged management to raise comparable sales growth view for fiscal 2022.

Speaking of digital endeavors, the company has been gaining from focus on improving digital capabilities, including boosting omni-channel services such as buy online, pickup in store services. Management highlighted that stores played an important role in the fulfillment of online sales. During the first quarter, 60% of the online sales were picked up in stores or curbside, shipped from store or delivered by store employees. Markedly, the company’s Domestic comparable online sales increased 7.6%, driven by higher average order values and traffic.

For fiscal 2022, online sales are expected to contribute in the mid-30% range to Domestic sales. The company’s strong omni-channel capabilities are likely to keep driving online revenue growth. Also, it is on track with adding new functionalities to its curbside pickup services for driving frequency, retention and personalization opportunities. Almost all its stores provide same-day delivery on thousands of products. In fact, several store locations are being strategically positioned to be able to ship out more volumes. Such well-chalked plans are likely to keep supporting the company’s online revenues. Apart from these, the company is focusing on increasing customer engagement through its app.

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Other Notable Efforts

Best Buy is focused on growth opportunities such as better execution in key areas, cost containment as well as investing in people and systems. The company is also testing new store formats. Meanwhile, the company is progressing well with programs like Total Tech Support, which provides support for fixing computers, laptops, appliances, smart home devices and connected devices as well as technical support from Geek Squad agents. Further, Best Buy expanded its In-Home Advisor program that includes advisors, who guide customers to select the right technology solution. The company’s loyalty program members have also continued to project growth.
We expect the aforementioned upsides to keep supporting this Zacks Rank #2 (Buy) company’s performance in the forthcoming periods. Markedly, shares of the company have gained 43% in a year compared with the industry’s rise of 95%.

Here are 3 Key Stocks for You

Abercrombie & Fitch ANF has a long-term earnings growth rate of 18%. It presently sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Boot Barn Holdings BOOT has a trailing four-quarter earnings surprise of 51.7%, on average. The stock sports a Zacks Rank #1.

L Brands LB has a long-term earnings growth rate of 13%. It currently carries a Zacks Rank #2 (Buy).

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