Analyst Note| R.J. Hottovy, CFA |
The key takeaway for investors coming out of no-moat Best Buy's second-quarter sales update is that consumer demand for work-from-home, appliance, and personal computing products have not been dampened by macro pressures or a wind-down in consumer stimulus spending. Through July 18, the company reported that sales for the quarter had grown 2.5% (2% domestically and 8% internationally), which represents material acceleration from the 8% declines reported during the latter part of the first quarter (April 12-May 2). We had anticipated mid- to high-single-digit sales declines during the quarter, but it appears that consumers have responded to Best Buy's improved online experience (online sales up 255% year over year) and that demand for work-from-home (computing, tablet) and home confinement (appliance) categories has held up (particularly in international markets). While we don't expect Best Buy's recent momentum (sales growth of 15% from June 15-July 18) to continue due to elevated unemployment and uncertainty regarding consumer stimulus efforts, we believe mid-single-digit growth is achievable for the balance of the year.