Bloomberg's Townsend on Best Buy Boosted By Wearables (Audio)

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with Kathleen Hayes and Pin Box on Bloomberg Radio. Shares of Best Buy are up more than eighteen percent today. Are you happen to be in the market for maybe a wearable or video games, tablets, computers, TVs, drones or connected home. Here to connect all the dots for us as Matt Townsend, retail reporter for Bloomberg News, Matt, thanks for coming into the studio. Tell us about Best Buy and how did they exceed analyst estimates? Yeah, some good news in the retail world, which has not had much

of it lately. Uh So they beat the expectations game. You know that their own forecast for the second quarter, where that sales would be down as much as two percent, they actually posted a small gain, which in the world of retail is a pretty big deal. Um. And then they said that for the rest of the year they expect profit to be a little bit higher than they previously said. So forecast up and they beat expectations in

the quarter. What's really working for them, because I note that they're best sellers are things like the Amazon Fire TV stick for forty bucks as well as Madden NFL seventeen for the PlayStation sixty bucks. Is that where they're making their money. They it's across the board. I mean they called out I mean the first of all the week, part of the market right now is mobile phones and tablets.

So one of the things that happened in the quarter was that that decline was less than they expected, and they said they basically are taking more market share from competitors. But what's really working for them? Um? Yes, things like drones, wearables like fitbits, all the stuff you do attracts sort of your health and activity. Um And also four K television, which is the relatively new high extremely high deaf flat screen televisions that are you know, priced higher than normal ones.

Talk about wearables for just a moment. For example, of their Apple watches are on sale, the sport Watch. They're offering them for fifty dollars, less than the regular price of three and fifty bucks. Also they're selling obviously the Samsung wearables as well as the Samsung virtual reality gear. Are they hurting Apple sales by offering these things at a discount? I would I would almost assume, or I would speculate that Apple is okay in these discounts. That's

why usually these vendor relationships work. I mean, one of the things about best Buy that's interesting is that, you know, the turnaround has basically been cutting costs, and now they're showing some growth, and what the CEO chalk that up to is, look, we have these really strong relationships with Apple, Microsoft, Samsung that allows us to have better assortment, better customer service in the stores. And they see that as as

a big advantage. And you know, if you've looked back last week, Target said they're like electronic sales were weak and actually blamed Apple, called out Apples as the weak link there. So it's it's potentially what's going on here is best Buy in this sort of brick and mortar retail world is taking share from Walmart, Target and those competitors. So you go to best Buy if you're looking for your d j I Phantom for quad copter, and especially

if you want it in in white. But what does it tell you when they're offering you know, like two hundred dollars off these things? Are they trying to just move them out of the store or is it just to lure you into the store so that then they can upsell you maybe to a five dollar uh you know version of a drone. Yeah, true, yeah, they they are probably it's probably both fronts, but more likely it's to get people in the door. If it's a hot item, put a little dis kond on and get someone in

the door. But also this is August, this is when a lot of inventors being cleared. Um. Also, I mean it's basically back to school. It's just is starting now too, So it could be you know, claianuce inventory for back to school. Um. But again, you know Best Buy, it's the big question mark has been can they return to growth? Can they return to growth? And they've grown their comparable store sales six out of the past eight quarters, which you know, you wouldn't have expected two years ago, you

wouldn't have expected that. So it's it's it seems like the right path. And they did say that, you know, they thought the first half was gonna be a little bit down as far as sales, and they show growth in the second half. Now they have this growth in the second quarter, they have you know, what looks like a bullish quarter or second half ahead of them. One deg reason is the new iPhone coming out, the iPhone perhaps going to be unveiled in September. Yeah, I mean

most speculation in September. You know Best buy one comment on that today. But a lot of their business been driven by product cycles. So when there's a new phone that is hot, or like when the Tabot sort of craze happened. Best Buy has been did well, but what we saw this quarter was that well most of the market was down in the US and a lot of the electronics categories best Buy wasn't um which is a pretty positive sign. Thus one of the reasons why the

stock is up so much today. The stock up eighteen percent today, up a nearly thirty percent a year to day. Based in Richfield in Minnesota, they've got a hundred and twenty five thousand employees. Are they still cutting staff or are they done with that? They're they're doing some of that. They're they're you know, they every quarter they closed some you know, a couple of stores here there. Um. I think compared to a year ago, they have twenty last stores in the US, which is they still have a

boatload of stores in the US. But the big cost cutting is mainly over the first phase of the turnaround. When the CEO Uber Jolie came in, he's been there a little over three years now. Was that too big of a company to bloated cost rationalize certain parts of the business. They sold off all their foreign divisions except for Canada, and now it's can they really show growth in the US, which is basically their business. Now it's

a forty billion dollar a year business. For you know, as much as people talk about Amazon everything, I mean, best Buy still turns out forty billion dollars worth of sales. I mean, think about that. That's a lot of money. That's a lot, that's a big that's a big chunk of the market that they still own. And as far as if you have a look at the brick and

water environment, they don't have competition. I mean, yes to people go to Walmart and Costco and and Target to buy business in the electronics field from Walmart and from some of those big box retailer and as far as especially especially electronics chain, they're the only one left. And as as electronics is, as electronics get more complex, hated, best Buy is betting that people will need more help, especially in person the ramping up services that obviously have

the geek squad. So that's sort of the whole play is to become a services company. So they sell you a tech product and they help you put in your home, and then they help service it throughout the life of the product and they help you get, you know, pick a new one. My guys out, definitely. I guess everyone't be in line for as you said, that new iPhone seven. iPhone seven is gonna be huge. They think, they think, yeah,

good point. Thanks very much, Matt Townsend. He is a retail reporter for Bloomberg News, telling us about the results of best Buy. The shares are higher, up by about eighteen percent today. This is Bloomberg coming up on taking stock. We're gonna take stock of commercial real estate in our nation's capital. Republican candidate Donald Trump he's put two hundred million dollars behind the renovation of the old post office pavilion for a hotel. That's next