MINNEAPOLIS-The cost reductions from its Renew Blue program, unveiled last November, plus an improvement in margin bolstered Best Buy to a 2,116.7 percent increase in second-quarter net income, which totaled $266 million.
Renew Blue is the retailer’s transformational strategy geared toward increasing its sales and profitability. Hubert Joly, Best Buy’s president and CEO, said the program has made progress with two of the problems he mentioned at an investor meeting last November: declining same-store sales and reduced margins.
Net sales in the quarter, which ended on Aug. 4, slipped 0.4 percent to $9.3 billion, including a 0.6 percent decrease in same-store sales—compared to a drop of 3.3 percent in same-store sales in last year’s second quarter. Gross margin increased 230 basis points to 26.5 percent.
At Best Buy’s U.S. stores, revenue was up 0.1 percent, driven mostly by sales from 57 net new Best Buy Mobile stand-alone stores which were opened in the third and fourth quarters of last year. Domestic online revenue jumped 10.5 percent thanks to increased traffic and average order value. In its international segment, revenue dropped 1.8 percent.
Overall selling, general and administrative expenses fell 1.6 percent in dollars and 30 basis points as a percentage of sales, to 22 percent. The bottom line also received help from a 92.3 percent reduction in restructuring charges.
Sharon McCollam, executive vice president and chief financial officer, said the momentum from the Renew Blue program provides an encouraging outlook for the second half of the fiscal year. McCollam said the Renew Blue priorities for this time period include price reductions to enhance Best Buy’s competitiveness, increased marketing costs to support growth in the mobile category, improvements in the multichannel experience for shoppers, optimization of the retail floor space and the replatforming of Best Buy’s website, bestbuy.com.