Best Buy sees solid second quarter as tech services boost profit margin

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(Reuters) – Best Buy Co Inc forecast second-quarter sales and profit above estimates on Thursday, as more people signed up for the consumer electronics retailer’s subscription-based tech support services and shopped on its website and app.

Best Buy sees solid second quarter as tech services boost profit margin

A company logo is seen on a Best Buy store in Westminster, Colorado January 16, 2014. Best Buy Co shares tumbled about 30 percent on Thursday after the world’s largest consumer electronics chain reported disappointing holiday sales and warned of a bigger-than-expected decline in quarterly operating margins. REUTERS/Rick Wilking (UNITED STATES – Tags: BUSINESS LOGO)

The company reported a better-than-expected profit in the first quarter, but did not raise its full-year forecast, taking into account a potential impact from the recently imposed U.S. tariffs on $200 billion worth of Chinese imports.

Best Buy’s shares rose 2.1% in premarket trade.

Gross profit margins expanded 40 basis points in the quarter to 23.7%, thanks to the high margin services, such as “Geek Squad” that provides general tech support and advice on setting up smart homes.

The tech support business has been a signature element of outgoing Chief Executive Officer Hubert Joly’s turnaround strategy that led Best Buy out of years of falling same-store sales.

An increasing share of Best Buy’s sales also comes from online, where it has been investing more to beef up delivery and its “click and collect” business that helps shoppers buy products online and collect them later from the stores.

Domestic comparable online sales rose 14.5% to $1.31 billion, making up for 15.4% of total revenue in the quarter.

The company’s overall same-store sales rose 1.1% in the quarter. Analysts on average had expected a 0.9% increase, according to IBES data from Refinitiv.

Excluding one-time items, Best Buy earned $1.02 per share in the first quarter ended May 4, ahead of analysts’ average estimate of 86 cents per share, according to IBES data from Refinitiv.

It forecast adjusted profit for the second quarter to be in the range of $0.95 to $1 per share, above Wall Street expectations of $0.96 per share. Its current quarter forecast for same-store sales too was largely above estimates.

Total revenue rose marginally to $9.14 billion in line with analysts’ expectation.

Reporting by Uday Sampath in Bengaluru; Editing by Tomasz Janowski and Arun Koyyur