Since coming online in the mid-1990s, Amazon.com (AMZN) has wreaked havoc on the retail industry. Everything from bookstores to department stores to, now, grocery stores have been disrupted by Amazon’s business model. But a few retailers are holding their own against this massive onslaught. In today’s blog, I want to look at one company fighting back against Amazon’s online empire.
It’s no surprise that big box retailers are dying left and right at Amazon’s mighty hand. According to the company’s own assessments, Prime Day, which took place in July of this year, grew a massive 60% since 2016. This number illustrates how difficult it is for brick and mortar retailers to survive in today’s online culture.
But some companies are still thriving even as Amazon seems to be taking over absolutely everything. One of these companies is electronics retailer Best Buy (BBY).
Yesterday morning, Best Buy posted better-than-expected second-quarter results. Thanks to strong demand for personal electronics, same-store sales jumped 5.4% during the second quarter, which was above expectations of 2.2% growth. Total revenue also rose 4.8% to $8.94 billion while net income increased 5.6% year-over-year to $209 million. The company also managed to post a 6.3% earnings surprise and a 3.2% sales surprise.
In addition, for full year 2017, Best Buy expects sales to grow 4.4% year-over-year, up from previous guidance of only 2.5% growth. Net income expectations are also up to 4% to 9% growth. This is ahead of previous estimates of 3.5% to 8.5% growth. So, it was a bit discouraging to see Best Buy’s shares dip 12% in yesterday’s trading.
This dip had to do with an unfortunate comment from Best Buy’s CEO, who said that his company’s stores may not be able to sustain this kind of growth in the face of Amazon’s massive attack. Ouch. A comment like that will certainly take a toll on investor optimism.
But as of today, Best Buy is still holding its own. In fact, the company’s solid 2% dividend should help it recover pretty quickly from yesterday’s stumble. So, as usual, we’re choosing not to believe the hype. Instead, we’ll stick to basing our decisions on a company’s fundamentals, and for the moment Best Buy’s fundamentals point towards continued growth for this brick and mortar survivor. That’s why Best Buy maintains a solid Buy rating in my Portfolio Grader tool.