Best Buy shares soar as Nintendo console buoys sales

Bloomberg

Best Buy shares surged to an all-time high as red hot demand for Nintendo’s latest video game console helped the US electronics retailer deliver a big sales and earnings beat for the first quarter.
Shares in the Minnesota-based company gained 21.5 per cent — its biggest one day rise in at least nine months — to $61.25 after it reported a surprise jump in same-store sales and sharply raised its full-year guidance.
For the three months to end of April, like-for-like sales rose 1.6 per cent, trouncing expectations for a 1.5 percent decline. Net income of $188mn on revenue of $8.52bn also came in well above analysts’ forecasts of $125.5m and $8.27bn. The company attributed much of the quarter’s outperformance to strong demand for Nintendo’s new Switch console, which went on sale on March 3.
Gaming has proved to be a rare bright spot for the retail industry, which is suffering from one of its worst sales slump in recent memories. Earlier this month, Target also credited sales of the handheld hybrid console for helping it post a smaller-than-expected drop in sales. This, along with continued growth of its online business, where sales rose by more than a fifth during the quarter, prompted Best Buy to raise its guidance for the year.
It now expects full-year revenue to grow by 2.5 per cent, up from its previous forecast of 1.5 per cent growth. Adjusted operating income will growth between 3.5 to 8.5 per cent, compared to its previous call for gains in the “low single digits”.
Elsewhere, shares in Abercrombie & Fitch jumped 9 per cent to $14.05 after the teen apparel retailer posted strong sales at its Hollister brand and said comparable sales for the company fell less than expected in the first quarter. The Ohio-based company, which declined to comment on takeover talks but has held early merger discussions with Express and American Eagle, said like-for-like sales at Hollister, its biggest brand, increased 3 percent, against expectations for a 0.8 percent drop.
Total like-for-like sales, a key industry metric, declined 3 per cent, narrower than the 3.4 per cent drop that Wall Street had forecast. The company added that comparable sales in the current quarter will remain “challenging” before results improve in the second half of the year. Overall, net sales at the company fell 3.6 per cent from a year ago to $661 millio but topped expectations of $651.3 millio.
Its net loss widened to $61m, or 91 cents a share, compared with $39.6m, or 59 cents a share, in the year ago period. Adjusting for one-time items, its loss of 72 cents a share was wider than analysts’ estimates of a loss of 70 cents.
In the wider market, a sell-off in oil and energy shares did little to dent investors’ enthusiasm for US equities, with both the S&P 500 and the Nasdaq Composite setting new highs.