August 20, 2013, 2:31 PM

Best Buy online sales increase 10.5% in the second quarter

The retailer says higher traffic and average order values helped drive growth.

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Best Buy Co. Inc.’s online sales in the United States increased 10.5% year over year during the consumer electronics retailer’s second quarter, reaching $477 million. In an earnings call today, Best Buy CEO Hubert Joly emphasized developing the online sales channel as the retailer’s top priority for its “Renew Blue” turnaround program, which Best Buy introduced earlier this year.

Joly said that during Best Buy’s fiscal second quarter, which ended Aug. 3, the retailer replaced its 10-year-old site search tool, improved product recommendations for online consumers who have not yet put products in their shopping carts, made it easier to buy Geek Squad tech support services online and improved the tablet shopping experience. It also added location-specific product offers and started an initiative to encourage consumers to write product reviews. Joly said he expects the number of customer reviews on BestBuy.com to quadruple by the end of the year, though he gave no figures.

In the coming months the retailer plans to further improve site navigation and the online merchandising for in-store clearance and open-box inventory, which is typically returned or display merchandise. During the second quarter, Best Buy began testing a program that allows 50 of its stores to act as fulfillment centers for online orders; Best Buy operates more than 1,500 stores in the United States. Joly says he expects the ship-from-store test in 200 stores in time for the holiday season. 

Best Buy also intends to move BestBuy.com to a new e-commerce platform by next spring. The retailer did not say what e-commerce platform it will move to, but its current e-commerce platform provider is Oracle Corp., according to the Internet Retailer Top 500 Guide.  Best Buy is No. 10 in the 2013 Top 500 Guide.

Joly is bullish on the potential of improving online conversion rates and overall margins by such enhancements as making sure consumers have a better picture of inventory no matter from what devices they are shopping, and better predicting consumer demand. For the three months ended Aug. 3, Best Buy reports:

  • Total revenue of $9.30 billion, a decrease of 0.4% from $9.34 billion the same period a year ago.
  • Online sales of $477 million, up 10.5% from a year ago. Best Buy did not disclose what online sales were a year ago, but based on the 10.5% increase Internet Retailer calculates they were approximately $431.5 million. Best Buy credits higher site traffic and higher average order values for helping drive the sales growth.
  • Domestic revenue, which includes web sales, totaled $7.81 billion, up 0.1% from $7.80 billion a year ago. Best Buy says its 57 net new Best Buy Mobile standalone stores helped drive this increase.
  • International revenue totaled $1.49 billion, down 3.2% from $1.54 billion a year ago. Best Buy says its closure of 15 stores in Canada triggered that loss, as well as lower comparable store sales internationally.
  • Domestic comparable store sales were down 0.4%, an improvement from the 1.6% decline Best Buy reported during Q2 in 2012. Best Buy includes web sales in its domestic comparable store sales calculation. International comparable store sales were down 1.8%, an improvement from an 11.3% decline a year ago.
  • The retailer completed the sale of its 50% stake in Best Buy Europe during the quarter. It says it received $526 million upon closing the sale. 
  • Net earnings of $266 million, up 2116.7% from $12 million a year ago. Much of this gain came from cost-cutting and restructuring, Best Buy says.

For the six months ended, Aug. 3, Best Buy reported:

  • Total revenue of $18.68 billion, a decrease of 5.2% from $19.71 billion a year ago.
  • Net earnings of $185 million, up 8.8% from $170 million a year ago.
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