Why Does Best Buy Offer Discounts for Father’s Day?

Best Buy Co. Inc. (NYSE: BBY) beat first-quarter profit estimates but missed on revenues, and the shares got punished, partly due to the slip in revenues, partly due to the announced departure of the chief financial officer and partly due to a seeming lack of interest in cutting more costs. The company’s chief executive officer said that share buybacks are going to be the growth driver for adjusted earnings per share and that full-year revenues are expected to be flat.

That’s not exactly a long-term formula for success. One way to drive revenues is to try to sell more at lower prices. That hits margins and profits, of course, but you can’t eat your cake, etc. But Best Buy needs a boost in revenues, and holiday promotions are one way to try to achieve that.

Best Buy’s Father’s Day promotions on electronics include a number of TVs, computers, cameras, and other gear, all offered at discounts we saw between around 12% and 30%. While typical reasons for discounts include getting rid of slow-moving inventory or selling a hot item at a discount as a loss leader to encourage sales of other goods, Best Buy may be demonstrating a third reason.

[nativounit]

First-quarter revenues from online sales amounted to just 11% of total revenues. Best Buy has to do better than that or Amazon.com Inc. (NASDAQ: AMZN) will overwhelm it eventually.

We’ve already said that Best Buy needs to close 200 of its 1,600 stores in order to reduce its costs. The corollary to that is that it needs to boost its online sales to make up for the lost revenue. Promotional pricing on every available occasion is practically a requirement in order for that to happen.

For Father’s Day, Best Buy is promoting a Lenovo Yoga 900 two-in-one touch-screen laptop (YOGA 900 – 80MK002CUS) for $1,049.99, a savings of 12.5% from the regular price of $1,199.99. Expedited shipping is free, and Best Buy includes several special offers on related items.

A Samsung 40-inch LED 1080p Smart HDTV (UN40J6200AFXZA) is being offered for $349.99, a savings of $150 (30%) from the regular price of $499.99. Expedited shipping is free.

[wallst_email_signup]

Best Buy is also promoting some high-ticket items but at no discount to the list price. For example, a DJI Phantom 4 quadcopter drone (CP.PT.000312) is selling for $1,399.99 in a bundle including a 16 GB micro SD card. Amazon, through a marketplace partner, sells the same drone for the same price but includes a 32 GB microSD card, along with the standard 16 GB card along with a microSD card reader and a few other items.