Best Buy Co. Inc.’s Chief Executive Corie Barry not only acknowledged the hard work of frontline workers during the pandemic, but she also applauded them for putting up with rude customers who don’t want to abide by COVID-19 rules.
“I want to genuinely thank our store and in-home teams for creating a safe environment for our customers and for continuing to provide exceptional service, even in situations where customers resisted following safety guidelines and, in some cases, were disrespectful,” she said on the earnings call, according to FactSet.
Social media and news sites have been rife with footage and stories over the past year of customers, including celebrities, who become combative with store staff over mask rules and other mandates retailers have put in place in response to COVID-19. Some of the altercations have turned deadly.
In addition to praising staff for their patience, Barry discussed the perks of working with the consumer electronics retailer, including bonus pay, certifications that will offer opportunities to do more than just primary roles, and flexible working hours. The company also offers wages and benefits that have increasingly become commonplace at consumer companies, including a $15 starting wage, tuition benefits and child-care benefits.
“We believe our flexible workforce initiative can add to our ability to attract and retain our employees, particularly in this tight labor market,” Barry said.
“Accompanying this surge in revenue are meaningful increases in both gross and operating margin, with operating margin doubling over 2019’s level, reflecting pricing discipline and cost efficiencies, and are particularly impressive given that the quarter included meaningful promotional activity to compete with Amazon’s Prime Day,” said Charlie O’Shea.
“Category strength is evident across the board, with the upward revision to its guidance reflecting Best Buy’s expectation that back-to-school/college and holiday selling seasons will be robust, validating our view that Best Buy will continue as one of the very best of global retail, ” added O’Shea.
On the call, Barry attributed the “less promotional environment” with being a “significant driver of our better-than-expected profitability in the quarter.”
Raymond James analysts note that Best Buy is investing in a future where its multi-platform sales and services will be even more appealing to customers.
Best Buy is rolling out the Total Tech Support membership program that launched as Best Buy Beta last year and offers Geek Squad support, VIP access and more for $199 per year.
“All in, this near-term investment should help Best Buy to continue to lead and retain new customers from the COVID pandemic,” analysts wrote.
“We would not be surprised to see Best Buy continue to update offers (over time) in order to remain competitive against the likes of Walmart+ and Amazon Prime.”
Raymond James rates Best Buy stock outperform with a $135 price target.
“Best Buy’s 2Q results highlight how a hybrid work backdrop continues to drive a greater emphasis on technology in consumers’ lives,” wrote UBS in a note.
UBS rates Best Buy stock neutral with a $130 price target.
Wedbush is more conservative in its analysis.
“Measuring how much change has been structural is difficult, but we believe that some of the sales gains in the last year are transitory and cyclical due to the pandemic and housing market strength,” analysts led by Seth Basham wrote.
“In fact, some sales in the past year may be pulled forward demand, particularly in
areas such as appliances and possibly in computing. That being said, we turned
positive on Best Buy shares into this quarter on expectations for a better near-term
outlook for computing due to the rise of the delta variant leading to more at-home learning and working.”
Wedbush rates Best Buy stock neutral with a $130 price target.
Best Buy is also trying a number of new store formats, including remodels of stores measuring 15,000, 25,000 and 35,000 square feet, launching 5,000-square-foot stores, and launching an outlet pilot that will include open box merchandise and large appliances.
“When buying technology, being able to see the product and to get in-person advice are still vital components of the shopping journey for many,” wrote Neil Saunders, managing director at GlobalData.
“So too is getting the product quickly and easily. Best Buy’s physical stores support both requirements which is one of the reasons it has been able to hold its own against Amazon so well. Arguably, it is also why Best Buy must now double down on its store service as Amazon considers opening larger department style stores.”
Best Buy stock has gained 21.1% for the year to date outpacing the S&P 500 index
which is up 19.8% for the period.