Consumer electronics retailer Best Buy (BBY) early Tuesday reported better-than-expected fiscal second-quarter sales and earnings and guided analysts higher for the current quarter, but investors cast shares down sharply after the company’s chief executive said same-store sales growth probably couldn’t be sustained. XAutoplay: On | OffBest Buy shares popped more than 5% in premarket trading but gave up those gains and plunged 11% to 55.50 in morning trades on the stock market today. Best Buy Chief Executive Hubert Joly cautioned analysts on a conference call that the retailer wouldn’t be able to sustain recent sales gains, raising concerns that e-commerce giant Amazon.com (AMZN) could pose a threat to his business. Best Buy reported same-store sales growth of 5.4% in its fiscal second quarter, beating expectations of 2.2%.
While Joly said, “we do not believe that mid-single-digit comps are a new normal,” positive comps are achievable, he said.
“They are going to get perfect quarters like this every now and again,” Brandon Fletcher, an analyst at Sanford C. Bernstein & Co., told Bloomberg. Best Buy “will continue to face waves of growth and decline, but its base products — printer ink, headphones, etc. — are not related to product launches and those sales are inexorably moving to Amazon and Wal-Mart (WMT) online.”
Richfield, Minn.-based Best Buy earned an adjusted 69 cents a share, up 21% year over year, on sales of $8.94 billion, up 5%, for the quarter ended July 29. Analysts expected 63 cents and $8.66 billion.
For the current quarter, Best Buy expects to earn 78 cents a share, up 26%, on sales of $9.35 billion, up 4.5%, based on the midpoint of its guidance. Wall Street was modeling 65 cents and $8.99 billion.
Best Buy also raised its sales guidance for the full year. It now expects revenue growth of 4% vs. its previous outlook of 2.5% growth.
Best Buy reported strong sales growth in computing, wearables, smart home, mobile phones and appliances.
Analysts say Best Buy is gaining business from struggling Sears and bankrupt HH Gregg, particularly in big-box appliances like refrigerators and washing machines.
For its fiscal third quarter, Best Buy expects same-store sales to rise 5%, based on the midpoint of its guidance.
“Our higher-than-expected comparable sales of 5.4% were driven by stronger consumer demand for technology products and by the strong execution of our strategy,” Joly said in a news release.
On a conference call with analysts, Best Buy Chief Financial Officer Corie Barry said she expects strong mobile phone sales in the current quarter. She cited the new Samsung Galaxy Note 8 and other new handsets, likely a reference to Apple‘s (AAPL) iPhone 8.
Best Buy’s fiscal second-quarter results also got a boost from hot sales of Nintendo‘s (NTDOY) Switch video game console, Barry said.
Best Buy said its domestic online sales rose 31% to $1.1 billion in the July quarter. Online sales accounted for 13.2% of domestic revenue, up from 10.6% in the year-earlier period.
