Best Buy said on Thursday it expects profit margins to be under pressure in the second quarter, as it spends more on expanding delivery services to support a surge in online shopping from people staying at home due to the COVID-19 pandemic.
The company’s shares, which have gained nearly 60 percent in the last two months, fell nearly 4 percent in afternoon trading, to $78.32.
The electronics retailer was forced to shutter stores across the US for weeks to help contain the spread of the coronavirus, but its outlets continued to provide curbside delivery for online sales, which surged over 155 percent on a comparable basis.
Best Buy said it was also ramping up its same-day delivery services, as people stuck at home under lockdown restrictions shop more for monitors, printers and other work-from-home equipment, as well as gaming consoles.
Online sales made up about 42 percent of Best Buy’s first-quarter domestic revenue of $7.92 billion, compared with just a 15 percent share a year earlier.
“We expect that our online sales will continue to be high as a percentage of overall sales in the second quarter, which will continue to pressure the gross profit rate,” Chief Financial Officer Matthew Bilunas said on a call with analysts.
Best Buy’s overall revenue fell 6.3 percent, to $8.56 billion, in the quarter ended May 2, but beat analysts’ expectations of $8.16 billion, according to IBES data from Refinitiv. Quarterly same-store sales fell 5.3 percent.
The company, which furloughed 51,000 hourly US store employees last month, said net earnings fell 40 percent, to $159 million.
Excluding one-time items, the company earned 67 cents per share, more than analysts’ average estimate of 44 cents per share.
The company maintained its quarterly cash dividend of 55 cents per share and said about 700 of its stores were open for customers on an appointment basis.
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