Editors' pick: Originally published May 24.
"Stores are the magic behind our 'ship from store' program and our ability to ship products even faster," explained Best Buy Chief Financial Officer Sharon McCollam on a call in response to a question on whether more stores would be shut in light of persistently sluggish same-store sales.
McCollam, who announced she will be leaving Best Buy in June to bask in some well-deserved retirement years, added that over one-third of customers still enjoy picking up their tech products inside a Best Buy store. The company didn't completely rule out some store closures, however.
"Over time we will optimize our [store] footprint, we are ready to continue this," Best Buy CEO Hubert Joly told analysts.
Under Joly, Best Buy has been very reluctant to close its big box stores, arguing it doesn't have many unprofitable locations and they serve a key purpose as hubs from which to ship merchandise to online shoppers. Best Buy has only closed 67 of its U.S. stores since fiscal year 2012, which is when it hit a peak of 1,103 locations. It currently has 1,036 large-format stores in operation across the country, based on its latest data.
It's hard to argue with Joly that being able to ship TVs and appliances from stores to quickly service online orders isn't working.
Sales online from Best Buy's domestic business spiked 23.9% from the prior year, a faster pace than the 5.3% increase seen a year earlier. Traffic to Best Buy's website and its conversion rate improved, said Best Buy. Growth online was a standout in a mixed quarter for the electronics retailer.
Shares of the Minneapolis-based electronics retailer fell as much as 8% Tuesday despite first-quarter earnings coming in at 44 cents a share, up 19% year over year, and easily ahead of Wall Street estimates for 35 cents. Total revenue fell 1.3% from the prior year to $8.44 billion, but surpassed forecasts for $8.29 billion.
Domestic same-store sales fell 0.1%, better than Best Buy's guidance for a 1% to 2% decline. The company credited sales momentum in TVs, home theater, appliances and wearable devices, which helped to mostly counteract weakness in Geek Squad services and tablets.
Best Buy sees second-quarter same-store sales unchanged and earnings of 38 cents to 42 cents a share. Wall Street expected 50 cents a share. The tepid outlook from Best Buy comes after similarly downbeat forecasts from bricks-and-mortar retailers such as Target (TGT) - Get Report that have seen a spending slowdown post-Easter.
Best Buy did reiterate it expects full-year sales and operating profit margin to remain unchanged from the prior year as sales pick up in the second half likely due to a new iPhone and Apple Watch from tech giant Apple (AAPL) - Get Report .
While Best Buy is still in love with its stores, other retailers operating huge stores are tripping over themselves to close them in order to cut costs amid the spending shift online.
Meanwhile, J.C. Penney (JCP) - Get Report plans to close seven stores this year, leaving it with 1,013 stores in the U.S. from 1,033 in 2006. Struggling Sears Holding (SHLD) is mostly relying on aggressive store closures to stem the tide in productivity as a weakened financial state has left it unable to invest in the appearance of its stores. The company said recently it will close 10 of its namesake locations (as well as 68 Kmarts) by the summer, leaving it with about 695 mall-based Sears locations. In 2006, Sears had 861 mall locations.