Best Buy (BBY) Proves to be a Best Buy For the Risk-Averse

If you're finding it hard to believe that a retail stock could be a winner, then you might be one of the truly risk-averse. That's a good thing, though; husbanding your hard-earned cash is nothing to sneer at, and finding the right investment a challenge. Best Buy (NYSE:BBY) may be a physical retail stock in an increasingly online shopping world, and a big-box retailer at that, but it's increasingly demonstrating that it's got its investors' fortunes in mind.

This Quarter: Best Buy Triumphant

Best Buy makes no bones about how this was a fantastic quarter for the company. It's one of a handful of “coronavirus winners”, even if the term is repellent on an instinctual level; how do you win during a disease that's killed so many and destroyed still more livelihoods? In this case, you win by providing what people need and want, much like any other time, and Best Buy did that all over.

Best Buy beat expectations on every front. The analyst consensus out of Refinitiv was $1.08 per-share earnings on $9.71 billion in sales. Best Buy's posted results were $1.71 per share—nearly double expectations—and they did it on just $9.91 billion in sales, which weren't all that far off expectations. Additionally, the $9.91 billion was up over last year's figures, which came in at $9.54 billion. Online sales, not surprisingly, spiked during the period, up 242.2% over the preceding period last year, reaching $4.85 billion on their own.

The company benefited in several directions. The sudden explosive growth of work-from-home movements—not to mention online-only school—prompted consumers to upgrade their home hardware so as to better be able to tackle the tasks at hand. Meanwhile, when work and school were done for the day, Best Buy swung in again, offering the video games, Blu-rays, and music players that accompanied folks in whatever workless hours they had.

The Next Quarter, However, Less Likely So

Best Buy also seems quite aware that it's not going to be able to catch lightning in a bottle again this quarter. While it's expecting sales that were higher than this time last year, it also understands that many of the conditions that produced those stellar results are pretty much off the table.

Work is still staying remote for the foreseeable future, but most have already picked up the necessary extra gear required to make work happen. Those whose work could never go online in the first place are finding themselves either heading back to work or completely unemployed. Schools are opening back up, if only tentatively and sporadically, which means the call for online education tools will drop to match. This means that people with time on their hands and cash to spend on new electronics will likely both drop off, though to some extent it may still be there.

Throw in the fact that extra unemployment dollars are less available than they once were and things look even worse for unnecessary purchases. Though there is still some hope for another round of stimulus checks, they may not go quite as far as they did in the past, or get used quite the same way.

Thus, Best Buy is issuing no guidance for the third quarter, maintaining that there are still too many unknowns stemming from the coronavirus to make for adequate planning.

Protection for the Risk Averse

Knowing what we know so far, it should be enough to prompt wonder as to how this works for the risk-averse. First, there's immediately good news: Best Buy has declared a dividend of $0.55 per share for anyone who holds Best Buy stock as of September 15. That's payable October 6. Already, the company is seeing some gains; third-quarter sales are up about 20% of what they normally are in the third quarter, which is itself traditionally a laggard in retail.

A genuine need for physical presence (hard to buy a television sight-unseen), that's also been already deemed essential, backed up by robust online shopping—as noted in the previous figures about how often it's been used—and containing tools that people need for everyday operations and other things more for fun gives Best Buy a strong presence in the retail market. With a new console generation coming up and holiday shopping about to kick in, electronics shopping will likely hold its ground for the most part. That, coupled with Best Buy's cautious stance about the third quarter, makes it a buy worth checking out for those who want their investment safeguarded.