Best Buy said Wednesday its sales grew 6.2 percent in the second quarter and raised its outlook for the rest of the year, continuing a rally among many of the nation's leading retailers as they head into the crucial holiday season.
The company now expects same-store sales on the year to rise 3.5 to 4.5 percent, compared with the previous forecast of a flat 2 percent. It edged up its forecast for earnings per share to $4.95 to $5.10, an increase of 5 to 10 cents.
Executives cautioned that operating profit would decline as it spends more on transportation, training and technology, particularly in the third quarter.
Wall Street, often edgy about Best Buy on earnings day, pushed shares down. Their value had lost over 5 percent at midday.
Chief Executive Hubert Joly said sales of $9.37 billion _ its largest second quarter growth in 15 years _ were helped by a favorable consumer environment, and "driven by how consumers are responding to the unique and elevated experience we are building."
For the three months ended July 29, the Richfield, Minn.-based company said it earned $244 million, up from $209 million a year ago. Adjusted for one-time events, the profit amounted to 91 cents a share, beating the consensus estimate of 83 cents.
Even as shares tumbled, Moody's retail analyst Charlie O'Shea described the company as one of the strongest performers in retail.
"Best Buy continued to build on its track record of excellent execution," O'Shea said in a report to investors. He noted that margins "are being largely maintained despite continuing investments, and meaningful online sales growth that continues despite the online maturity of many of its product categories."
Joly acknowledged the slower pace of online growth in consumer electronics, but said the company is gaining market share.
Efforts to simplify online shopping and delivery as well as its in-store pickup, now a decade old, have led to substantial contributions to revenue. Best Buy now gets 15 percent of total domestic sales from online purchases.
Best Buy is benefiting from a stronger economy, rising wages and tax policies that are putting more money in consumers' pockets. It's also gaining market share as Radio Shack, Sears and other mass merchandisers close stores.
During the quarter, Best Buy announced an $800 million cash offer for GreatCall, a California-based company that develops mobile products to connect older adults with family caregivers, service providers and emergency services, aiming to help them live independently longer.
In his first public comments since the purchase, Joly told analysts he considers it a "beachhead for Best Buy in the health space, providing an entry point to more opportunities."
The deal is expected to close by the end of next quarter.
Best Buy has been moving more aggressively into health and wellness products in recent years, aiming to anticipate the ways people use technology to do such things as improve their fitness or send an alert if an elderly parent hasn't opened the refrigerator door.
It also has tried to more deliberately marry its Geek Squad expertise with its growing array of digital products, believing the two will work together to fuel growth in hard-line sales and services.
The acquisition of GreatCall, which has nearly a million customers, gives the retailer another way to expand its home-adviser service and other programs aimed at helping people feel less overwhelmed by technology and gadgets.
Down the road, it also will enable the company to form partnerships with insurance companies and social service providers serving older adults, as it is already doing with its Assured Living service, Joly said.
"The human aspects and the economic aspects go hand in hand," said Joly, adding that while many companies see business opportunities in the coming age boom, "very few go into people's homes and have people install and support the technology."
Best Buy began offering its free, in-home consultation service last September and has focused on training a growing cadre of employees, an expense that is cutting into short-term profits. The company said it now has 430 home advisers, up from 300 at the start of the rollout.
Its subscription-based Total Tech Support program, which it launched at the end of May, gives consumers access to Best Buy's Geek Squad expertise.
The company is betting that expenses now in hiring higher paid workers and increasing the expertise of front-line workers will ultimately distinguish it from competitors such as Amazon, Target, Costco and Walmart that might sell products but lack the personal touch.
During the quarter, Best Buy launched its exclusive smart TV line in partnership with Amazon. Additional models will hit the market in September and October gearing up for the holiday shopping season.
Jason Long, founder of the retail consulting firm Eye-on-Retail, said he doesn't read too much into the dipping stock. Shares are up 33 percent in the last year overall and more than double the last two years.
"It's just a blip," he said.
Long believes the fundamental strategy to better integrate services and products will outlast short-term volatility, if the company can pull it off in practice.
"They're looking for different ways to connect with the consumer," he said. "They're going for that long-term relationship with the customer vs. the one-time hit."
