Thanks to Best Buy's (BBY -0.25%) strategic place within tech-focused retail, along with its strong online presence that continues to grow, Best Buy is one of the few appealing brick-and-mortar retailers to invest in. The remote work trend received a big boost in 2020, and it seems highly unlikely that it will be going away.
This isn't even to mention the simple fact that we are all using technology more and more in our homes and daily lives. Because of that, things like laptops, cameras, and home office supplies are only going to see improving demand. Best Buy is in the right spot to cater to that demand.
Demonstrated ability to drive top-line growth
Back in fiscal 2017, which ended on Jan. 28, 2017, Best Buy did look for a moment like it was going to get dragged down in the so-called "retail apocalypse" largely attributed to the meteoric rise of Amazon. Full-year enterprise revenue became stagnant that year, with $39.4 billion in enterprise sales versus $39.5 billion the year prior.
Since then, the company has returned to annual growth. It hasn't been the strongest growth, but Best Buy has found a way to blend its stores with a solid digital business, along with the Geek Squad services that help with broken devices and software setup.
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Financially, as well as in stock performance, fiscal 2021 has been the company's best in a long time. Third-quarter results ended Oct. 31 saw a 21.3% year-over-year increase in enterprise revenue. Enterprise comp sales increased 23% year over year, and earnings per diluted share improved 34.5% to $1.48 on a generally accepted accounting principles (GAAP) basis. Domestically, Best Buy is doing great online. Domestic online revenue increased 173.7% to $3.82 billion and was 35.2% of total sales, compared to 15.6% in the year prior.
It would be unrealistic to anticipate that kind of growth once COVID-19 is brought under control and social distancing measures ease. On top of work equipment, consumers also bought things like TVs and home theater equipment, since they spent so much more time at home this year. That being said, Best Buy is still sitting in a bright spot within retail, and data so far seems promising for the fourth quarter.
Holiday retail sales in the U.S. increased 2.4% between Nov. 1 and Christmas Eve, according to the Wall Street Journal. The bulk of that increase was predictably from digital sales. Best Buy has been providing guidance given the volatility facing the entire economy, but with the continuation of a socially distanced winter, the demand for TVs, gaming, and tech seems likely to continue. The servicing of that tech will also increase in demand, setting up Best Buy's Geek Squad services for more business down the road.
Tech demand isn't going away
Looking past the fourth quarter, Best Buy still seems to be in the right spot. No, it doesn't have the scale of something like Amazon, Walmart, or Target. But what it does have is specialization. If you want tech and devices, as a consumer you can rest assured that Best Buy is going to have what you're looking for. The stores have a massive inventory with a largely diversified price range to meet consumer demand.
Considering the aforementioned trends in Best Buy's online sales, and the manner in which they are becoming a larger piece of the company's overall business, it's clear that Best Buy is competing in the e-commerce game. As our phones (for better or worse) continue to become an integral piece of our lives, and remote work increases the need for an above-average laptop and office supplies, it's hard to see Best Buy's business not benefiting.
Best Buy is also a far cheaper play in the space than many of its rivals, trading at under 16 times earnings.
