First, they came for computer monitors, networking equipment, freezers and video games.
Two months into the pandemic, Best Buy is now seeing customers shop for new home theater systems, cooking ranges and dishwashers as they realize they are going to be spending a lot more time at home in the months ahead even as states relax stay-at-home orders.
“The initial demand was definitely around working and learning from home,” said Best Buy CEO Corie Barry. “What we’re starting to see is there’s also demand for cooking and importantly, I think we all feel it, in entertaining from home.”
They expect gaming to continue to be hot for a while, too, even before new consoles come out in the fall.
“Clearly, if you have kids at home, and you cannot be the best teacher in the world, a substitute has become a Nintendo Switch or an Xbox or a PlayStation,” said Mike Mohan, Best Buy’s chief operating officer.
Growing demand for products to work, learn, cook and play at home as consumers settle into a new pandemic way of life, as well as a bump from stimulus checks, have helped to stabilize Best Buy’s sales in recent weeks. Its sales dropped nearly 20% during the six weeks in March and April when it closed stores to foot traffic and pivoted to curbside pickup.
Earlier this month, Best Buy also started reopening some stores for appointments with extensive safety protocols in place. It now has 700 stores, or about 70% of its total, open for in-store consultations.
As it’s done so, Barry said Best Buy has seen pent-up demand with customers bringing in cellphones to be fixed as well as coming in for more complex purchases such as large appliances and TVs.
In the coming weeks, Best Buy plans to begin extending hours at some stores and will more fully open some to the public in select markets. Best Buy is being more cautious than many other mass retailers that have more quickly reopened stores.
“We are trying to be very methodical and analytical in our approach to opening stores,” said Barry, adding that the company is looking at everything from the spread of the virus, the mobility of customers, the availability of employees and customer demand on a market-by-market basis.
Best Buy shares slid nearly 4.4% on Thursday as executives indicated they expect the pressures on sales and profits they saw in the first quarter to continue in the coming months.
Its first-quarter comparable sales fell 5.7%. Overall revenue declined 6.3% to $8.6 billion.
As consumers shifted their purchases online during the pandemic, Best Buy’s online sales skyrocketed 155% and accounted for 42% of its overall revenue. But that shift also squeezed Best Buy’s profit margins because of the costs to fulfill online orders. Its net earnings declined 40% to $159 million.
Best Buy said it has spent about $200 million on COVID-related measures, including employee pay and benefits as well as safety measures such as providing workers with face masks and face shields.
About 40 of its stores remain closed in the U.S., mostly in hot spots with a high number of coronavirus cases.
As stay-at-home orders were being announced around the country, Best Buy saw sales spike 25% in one week in mid-March as consumers rushed to grab home computing and food storage equipment.
While it was deemed an essential retailer in most jurisdictions and could have stayed open, Best Buy decided to close its stores to foot traffic on March 22. It quickly rolled out a curbside pickup model for the safety of customers and employees. It also furloughed about 51,000 mostly part-time workers and suspended in-home repairs and installations.
During the six weeks its stores were curbside-only, Best Buy managed to retain 81% of its sales. Online sales surged more than 300% those weeks, with about half of those orders being picked up from stores.
Neil Saunders, an analyst with GlobalData Retail, said the fact that Best Buy did not see a steeper drop in sales while its stores were closed to foot traffic, especially because it sells bigger-ticket items, is “nothing short of remarkable.”
Since Best Buy has reopened stores by appointment this month, it has retained about 95% of its sales, executives said. It also has resumed many in-home services.
Best Buy is talking to its vendor partners about expanding its assortment of other products in demand during the pandemic such as video conferencing, food preparation and storage and family entertainment.
Barry said she sees more opportunities, too, for Best Buy to offer a suite of home-office solutions.
“I think people have been piecing together what they can to make it work,” she said. “As work from home becomes a more sustainable practice, I think these more fulsome approaches to home office will become really important.”