Shares of Best Buy were popping Thursday as management made their case that an artificial intelligence upgrade cycle for personal computers and devices was starting to play out. Revenu e in the company’s fiscal 2025 first quarter fell 6.5% year over year to $8.85 billion in the three months ended May 4, missing the $8.96 billion expected by analysts, according to estimates compiled by LSEG. Adjusted earnings per share of $1.20 rose 5.3% on an annual basis and topped the $1.08 predicted by analysts, LSEG data showed. BBY YTD mountain Best Buy YTD Best Buy stock’s roughly 13% gain was all about what was said on the post-earning conference call about how consumers are going to want the latest and greatest AI features on their PCs and smartphones, which means more store and online traffic and more sales for the electronics retailer. Bottom Line This was a better-than-feared quarter from Best Buy. Though sales did miss the mark, both domestically and abroad, the company is running more efficiently than the Street was expecting as profitability results came in better than expected. Same-store sales came up short. But management said on the call that “gains in services and laptops” helped offset struggling categories such as appliances. Services, which include membership offerings, helped boost the company’s gross margin performance. Services are an area that Best Buy can lean into and leverage to differentiate from online retailers like Amazon . While Amazon can compete on prices and offerings, it does not have physical locations like Best Buy, making it difficult to compete in terms of the in-person customer experience, product setup, or technical support side of things. That’s not to say that Best Buy is sitting by idly in e-commerce, the company is making progress with its omnichannel experience, with CEO Corie Barry saying on the call that “fulfillment experience continues to improve, with almost 60% of our packages delivered or available for pickup within one day, and 40% of our digital sales are picked up in stores by our customers, with more than 90% of these orders available within just 30 minutes.” Best Buy Why we own : We took a position in Best Buy because we believe it will prove to be a go-to destination for consumers looking to upgrade hardware, much of which was purchased during Covid, to new AI-powered devices. Computer and mobile device lifecycles tend to be about four years, which is how far removed we are from the start of the pandemic when everyone was building out their home offices. In the meantime, we’re happy to stay patient as the thesis plays out thanks to the roughly 5% annual dividend yield. Competition : Target , Walmart , Amazon , Costco Most recent buy : April 30, 2024 Initiated : March 27, 2024 The health of the consumer remains a key watch item and that’s not unique to Best Buy. “Macro factors continue to fluctuate and put pressure on consumer spending,” Barry said. She goes on to state that “consumers continue to…
Read More: Best Buy surges on signs the AI-driven PC and smartphone refresh is