Best Buy (BBY +0.78%) is one of the most remarkable comeback stories of the past decade. Many people dismissed the company as an early victim of e-commerce growth.

While investors left Best Buy for dead, the company was hard at work slashing prices, increasing its own e-commerce chops, and cutting costs. The company has also been investing in initiatives such as better customer service, price matching, and faster delivery to better compete in an online world. Those steps continue to pay off, as Best Buy reported results that exceeded expectations.

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Best Buy results: The raw numbers

Data source: Best Buy Q1 2019 Financial Release. Chart by author.

What happened this quarter?

One of the most notable metrics for the quarter was comparable sales, which jumped 7.1% year over year, continuing the impressive growth of 9% it achieved last quarter and well above the 3% year-over-year gain expected by analysts. International comps also were strong, up 6.4%.

These comps helped drive revenue and earnings growth that outperformed both the analyst consensus and management's own forecast for the quarter.

It was just three months ago that Best Buy guided for revenue in a range of $8.65 billion to $8.75 billion, enterprise and domestic same-store sales growth of 2% at the midpoint, and international comps in a range of flat to 3%. The company also expected adjusted earnings per share of between $0.68 and $0.73, so the company surpassed all its own internal benchmarks. 

Online sales were also in the limelight, up 12% year over year but lower than the 22.5% increase in the year-ago quarter. Best Buy's CFO Corie Barry said that last year's sales benefited from gaming console and television launches that skewed the results, and the company gained market share during the quarter.

The investments that produced Best Buy's remarkable sales growth weighed on the company's operating income, which declined 20%. The company also said that its investments in future growth, variable expenses resulting from higher revenue, and increased incentive compensation expenses all came into play.

"We are excited by our momentum and continue to believe we are operating in an opportunity-rich environment driven by technological innovation and customers' need for help," said Hubert Joly, Best Buy chairman and CEO. "We are focused on providing services and solutions that solve real customer needs, and on building deeper customer relationships."

Looking ahead

For the current quarter, Best Buy is forecasting revenue of $9.15 billion, which is at the midpoint of its guidance and represents 2.3% year-over-year growth. The company expects comparable-store sales growth in a range of 3% to 4%. This will produce adjusted earnings per share between $0.77 and $0.82, which would represent year-over-year growth of between 12% and 19%.  

The stock sold off shortly after the report, likely due to slowing growth of Best Buy's online sales and because the company elected not to increase its full-year guidance despite the strong start to its fiscal year. Management appears to be erring on the side of caution.

Best Buy CFO Corie Barry said investors shouldn't read anything into that. "We just felt like there's so much of the year still in front of us ... We are trending toward the higher end of our revenue range." I think Best Buy management is being prudent by waiting to increase the forecast.

The big box retailer has delivered far better results recently than anyone expected. This quarter was another solid entry in the company's ongoing transition.