Demand for Fitbits and the Fortnite computer game sent shoppers flocking to Best Buy during the all-important holiday shopping season, helping the electronic goods retailer buck the gloom in the consumer technology sector.
Shares in the Minnesota-based company were up 15 per cent in New York, bringing its market capitalisation to almost $19bn, as investors cheered its unexpectedly strong fourth-quarter results and upbeat outlook.
Ahead of the latest results, hopes had been muted for Best Buy, which operates about 1,500 stores across the US, Canada and Mexico.
A subdued sales forecast from Apple and a string of sales warnings from chipmakers cast a cloud over the consumer electronics sector. A mixed bag of results from large US retailers added to the concerns, as did data earlier this month that showed an unexpected plunge in retail sales in December.
However, Best Buy confounded expectations to deliver a 3 per cent rise in like-for-like sales for the quarter ended February 2. Analysts had expected the closely watched metric, which measures sales at stores open at least a year, to rise by a more modest 1.7 per cent.
Corie Barry, chief financial officer, said “wearable” technology such as fitness trackers, appliances and smart home devices had helped offset declining sales of mobile phones.
Computer games and consoles had been in particularly high demand. Ms Barry said she had been surprised by the scale of interest in Fortnite, a “battle-royale” contest with 200m registered players.
Describing the Epic Games title as a “phenomenon”, she said it had also spurred demand for the Nintendo Switch console, as well as headphones and other accessories.
“Obviously, a good consumer environment helped”, she said, adding that Best Buy was reaping the rewards from a “more relationship-based experience”.
Shares in Best Buy have been volatile as Wall Street tries to understand rapidly shifting trends in consumer electronics and how the company is faring in the digital era.
The stock had been down as much as 42 per cent after a record high last August, but the gains on Wednesday means they have since recovered 46 per cent.
Best Buy has been seeking to manage the rise of Amazon by making its stores more attractive, such as offering installation and tech support services through its Geek Squad.
The retailer also stepped up a push in the connected smart home market in 2017, launching its In-Home Advisor scheme, which offers free consultations. Last year the group completed the $800m acquisition of GreatCall, a maker of care devices for pensioners.
For the fourth quarter, total sales came in at $14.8bn. While that is down from the $15.3bn recorded last year, the drop is due to the extra week in the prior-year period. Analysts had forecast sales of $14.68bn. Net income, at $735m, blew past predictions for $703m.
Underscoring its confidence, Best Buy forecast like-for-like sales growth of between 0.5 per cent to 2.5 per cent for the current year and earnings of between $5.45 to $5.63 per diluted share.
The company also raised its quarterly dividend by 11 per cent and announced a plan to buy back $3bn of stock.