A buyer checks equipment for sale in the Best Buy store in Miami, Florida.
Joe Raedle | Getty Images
When Americans move into new homes, remodel homes, and watch property values rise, Best buy CEO Corie Barry said they are buying equipment and big screen televisions and contracting the company to implement new technology.
The strong real estate market is one of the main reasons the consumer electronics retailer exceeded the expectations of the analysts with regard to the results of the first fiscal quarteraccording to Barry. She said stimulus checks have also fueled spending on home theaters, appliances and computers.
“Despite the increased demand we saw during the pandemic, we believe the nesting phenomenon will continue to drive demand for products and services that help customers improve their home experience,” she said in a call for earnings.
Property prices have been rising for months as property supply drops to near record lows and interested buyers submit competitive bids. House prices in March saw the biggest win in over 15 years, according to the S&P CoreLogic Case-Shiller National Home Price Index. The pandemic has exacerbated these trends by causing some consumers to move from dense cities to suburban or rural areas where they can have larger yards or a home office.
This has fueled demand for several pandemic beneficiaries, including Home Depot and Lowes. Other retailers have also invested heavily in housewares. For example, Walmart has teamed up with gap to launch an exclusive brand of bed linen, bathroom and other home accessories.
For Best Buy, the hot housing market is a boon that has expanded to include services and goods, said Barry. She said it was a sales driver, mostly with people moving into new homes. Sales on the Internet and in stores that have been open for at least 14 months increased 37.2% over the same period last year.
“When you’re thinking of a moving experience, not only do you want new equipment, but all connected equipment to work for you in a new environment,” she told reporters when he called. “And that could look like a new television. It could look like a new home theater setup for many of us. It might look like a new office setup or a new learn-from-home setup for many of us now.”
She said Best Buy has a “unique advantage” in selling products and providing services such as home plumbing and technical advice.
“We all know that there is nothing more frustrating than when you move in and your wireless network is down on the first day – especially in the life we live in,” she said.
The company saw a recent trend in new customers, with millennials becoming Best Buy’s largest customer cohort in the past 12 months, Barry said. Millennials, who are between 25 and 40 years old by the Pew Research Center’s definition, are also the generation that drives home sales when they marry, adopt pets, and have children.
Real estate trends could help Best Buy as it faces difficult comparisons in the quarters ahead. Technology sales – like laptops and computer monitors – were particularly high during the pandemic as more people worked, cooked, and attended school at home.
Some analysts have warned that the pandemic may have pushed buying forward, which could dampen demand. For example, Wedbush analysts downgraded the company’s stock to neutral in late April, saying home improvement and home furnishings retailers will make bigger profits than Best Buy this year. The equity research firm cut Best Buy’s price target to $ 125, which is about 5% above what stocks are currently trading at.
The retailer raised its forecast for the first half of the year. citing “extraordinarily high” demand in the first quarter this continued into the second. However, CFO Matt Bilunas confirmed the uncertainty in the second half of the year with a profit call on Thursday. He said consumers may spend less on consumer electronics as they go out to eat or vacation more.