Best Buy's Recent TV Sales Growth Likely Can’t Be Sustained, CEO Cautions

Best Buy’s “market-leading customer experience” on Ultra HD in large-screen TVs “continued to drive sales growth and market share gains” in its fiscal Q1, CEO Hubert Joly said on a Tuesday earnings call. “We continue to build on this experience” as Best Buy rolls out 376 new LG stores within a store, in addition to its existing Sony and Samsung partnerships, Joly said. E-commerce revenue jumped 23.9 percent in the quarter to $832 million, prompting one questioner to ask Joly if Best Buy plans physical store closures as a result. “In a context where revenue, total revenue, would be flat, then yes, it would put pressure on the economics in the business,” Joly responded. “If you are going to buy a 4K TV, the only way to see the quality of the picture and ask questions is really in the store,” he said. Best Buy gained TV share in the quarter, “and we’d expect to, based on the premium experience that we have to offer the customer in our store,” outgoing Chief Financial Officer Sharon McCollam(see 1605240052) said in Q&A. “We continue with the tremendous partnership that we have with Samsung and Sony and LG, et cetera. With our partnerships, we have an exceptional experience in our stores. These are still new technologies for all the customers that are buying new 4K TVs and we are continuing to offer the customer a very, very strong experience and I think that’s differentiating us from others.” But Joly chimed in to caution that Best Buy’s TV sales growth likely won’t be sustainable. Historically, Best Buy has done “particularly well” during the “first part” of any new TV product cycle, he said. “Then as the technology gets more mass, then it gets into more places,” he said. “And at some point, the growth in TVs will slow down,” and it’s doubtful Best Buy will “be able to hold the kind of great share we’ve had," he said. "We are not surrendering in advance, but as investors, you guys have been around, you know that this is the kind of thing that happens. So when it happens, don’t be surprised.”