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Here's What Dragged Down Best Buy's Holiday Sales

By Motley Fool Staff - Jan 19, 2016 at 12:00PM

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Everyone's buying smartphones these days, right? Well ...

Best Buy (BBY -3.12%) just reported holiday sales, and contrary to expectations, they were down on a year-over-year basis. The company cited weak mobile-phone sales as the stick in the mud driving down the numbers, and with good reason.

In this clip, Sean O'Reilly and Dylan Lewis talk about just how bad the smartphone sales dip is, and how it's also affecting non-U.S. companies.

A full transcript follows the video.

 

This podcast was recorded on Jan. 15, 2016.

Sean O'Reilly: Starting off today with smartphones, and what's going on there. A bit of a lead-in: Best Buy reported holiday sales, and they were not pretty. This is for smartphones.

Dylan Lewis: Yes. Well, they reported holiday sales in general, but the particularly ugly part of the report was smartphones.

O'Reilly: Because lots of people buy -- yeah. Domestic sales over the nine weeks ended Jan. 2 fell 1.2%, excluding new stores and closures year-over-year, and according to a press release, the domestic decline was primarily driven by the mobile phone category. So they're actually calling out mobile-phone sales. Do you think they're being a little weak there? Or what?

Lewis: They go on to say, "excluding mobile phones, domestic revenue increased year over year due to our strong performance in health wearables, home theater, and appliances."

O'Reilly: So maybe they're warranted.

Lewis: Yeah. And they actually do a segment by segment breakout here, and they look at some of the numbers, and domestically, the computing and mobile-phone segment, which is actually what we're going to spend quite a bit of the show talking about, was down 7% from last year, and that's lapping a 2% decrease the year before.

O'Reilly: Everybody I know -- Christine and James upstairs were talking about buying new phones. People are buying phones. What's going on here?

Lewis: That's the weird thing about it. Everyone you see has a smartphone. Everyone you know has a laptop or a tablet or something like that. You don't think of these as struggling businesses.

O'Reilly: When did the iPhone 6 come out? Earlier this year, so that's not it ...

Lewis: So the 6S came out in the fall, and the 6 came out --

O'Reilly: Spring, right?

Lewis: Yeah. Another piece of news -- the way Best Buy was stating this was "domestic." But this is not just a domestic issue with these slowing growth rates. Taiwan Semiconductor Manufacturing Company (TSM -0.80%), they are a component company that makes chips that power the iPhones, said that it expects Q1 revenue to be down 11% year over year, and that is due to soft demand for high-end smartphones. And just to give you an idea of their relationship with Apple (AAPL 0.99%) as it relates to their larger financials, roughly 20% of their revenue comes from sales to Apple.

O'Reilly: Wow.

Lewis: Two other Apple providers, Largan Precision, a company that makes camera modules, and Catcher Technology Co., a company that specializes in metal casings, both have issued similar guidance about what they expect for 2016.

Dylan Lewis has no position in any stocks mentioned. Sean O'Reilly has no position in any stocks mentioned. The Motley Fool owns shares of and recommends Apple. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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Stocks Mentioned

Apple Inc. Stock Quote
Apple Inc.
AAPL
$174.75 (0.99%) $1.72
Taiwan Semiconductor Manufacturing Company Limited Stock Quote
Taiwan Semiconductor Manufacturing Company Limited
TSM
$89.23 (-0.80%) $0.72
Best Buy Co., Inc. Stock Quote
Best Buy Co., Inc.
BBY
$82.30 (-3.12%) $-2.65

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