Building on its blockbuster holiday season, Best Buy saw its biggest surge in spring sales in more than a decade.
The trifecta of a strong cycle in consumer electronics, a booming economy and the struggles of other competitors combined to push the Richfield-based electronic chain's comparable sales in the first quarter to 7.1 percent.
On a conference call with executives, one analyst noted that his financial model didn't go back far enough to see when Best Buy last had that big of a jump in the February-to-April quarter. "It was a long time ago," at least more than 10 years ago, said Chief Financial Officer Corie Barry.
"I will go back to look in the microfiche," quipped the analyst, Anthony Chukumba with Loop Capital.
Joking aside, Best Buy's often-skittish investors were not celebrating yet. They continue to be concerned these high-flying days won't last — a perennial concern when one of Best Buy's biggest competitors is Amazon.
The company's shares, which are often quite volatile after it reports earnings, dropped 7 percent Thursday amid disappointment executives did not increase the full-year guidance of flat to 2 percent sales growth given the quarterly results that far surpassed analysts' and the company's expectations.
Some also seemed miffed the big sales jump did not lift its profit more than it did.
Barry said Best Buy expects to see the momentum continue into the second quarter, but noted that the company will be up against stronger sales numbers from a year ago. The company forecast second quarter sales to grow 3 to 4 percent.
The company did not update its full-year forecast since the first quarter accounts for only 15 percent of its annual sales and executives wanted to give it some breathing room, Barry said.
CEO Hubert Joly acknowledged that the overall environment is helping Best Buy, as it is many other retailers. But he also sees significant opportunity ahead for Best Buy, especially amid a strong product cycle in consumer electronics.
"I continue to be impressed by the magnitude and pace and breadth of technology innovation," Joly told analysts. "What's unique in this era is how technology now gets embedded into more and more things: light bulbs, doorbells, large appliances, small appliances and how all of these devices are connected."
Stephen Baker, an analyst with the NPD Group, said overall sales in the consumer electronics industry, which is a relatively mature business, have demonstrably picked up in the last six to nine months and is expected to continue to grow through at least the end of 2019. Best Buy is benefiting from that lift as the company has better positioned itself to compete in the last few years.
"The technology is more interesting, it's more relevant and it's more valuable to consumers," said Baker, adding that lower-priced, entry-level products are struggling a bit, while consumers are gravitating more toward better products in the mid to high price ranges.
In the first quarter, Best Buy said it saw growth across most of its business, with the largest drivers being mobile phones, appliances, computing, tablets and smart home products.
Its total revenue rose 6.8 percent to $9.1 billion. Online sales grew 12 percent, a slowdown from a year ago.
Net profit rose 11 percent to $208 million, up from $188 million in the same quarter a year ago.
One reason the company's profit wasn't even higher, executives said, is it ended up spending more in bonuses and other incentive-based compensation because the Best Buy's performance far exceeded its goals and because mobile phone sales, while up in the quarter, are not as profitable.
Neil Saunders, an analyst with GlobalData Retail, said in a research note that the sales growth was impressive — especially since Best Buy in the midst of closing about 250 of its small-format mobile phone stores. But he added a caveat that it likely got a one-time lift from tax cuts and bonuses that helped fuel technology-related purchases.
Still, he said, the "robust results from Best Buy serve as a reminder that with focus and effort it is possible for any retailer to succeed against Amazon and other online players."