Skip to main content
lex

Lex is a premium daily commentary service from the Financial Times. It helps readers make better investment decisions by highlighting key emerging risks and opportunities.

Are there second acts in American retail? Tuesday's earnings from Best Buy and Barnes & Noble – both of which are the last chain standing in categories decimated by Amazon and Internet sales generally – suggest different answers.

Electronics chain Best Buy, in the midst of a turnaround based on cost-cutting, lower prices and more appealing stores, once again released better-than-expected results. That sent its shares up 15 per cent, tacking on to a gain of 160 per cent in 2013. At Barnes & Noble, dwindling sales sent the shares down 15 per cent. Might the reversal at Best Buy serve as a template for a comeback at the book seller?

Best Buy has not only stopped the sales declines; there is actual hope for growth. Same-store sales declined just 0.6 per cent in the first quarter – impressive for a company in the middle of remaking itself. Best Buy is adding mini Samsung and Microsoft stores, matching competitors' prices, and fine-turning its mix of in-store and online sales. It is also trying to take out upwards of a billion dollars in costs. As a result, the operating margin came in at 2.2 per cent for the quarter, up from 1.9 per cent last year.

Barnes & Noble built its survival strategy around an e-reader, the Nook. (Pearson, parent company of the Financial Times, is also a Nook investor.) Like BlackBerry, Barnes built an acclaimed device, but there was little demand for a third competitor for Kindles and iPads. Nook revenues were down 20 per cent in the quarter. Overall sales dipped nearly a 10th, and management expects more of the same ahead.

The lesson seems to be that bricks-and-mortar retailers must compete on what is in their stores. There is no reason that Barnes & Noble, with the right management, can't do this – unless, of course, electronics are simply a better fit for buying in person. The look and feel of a TV, is important. The same is true of books, of course, but you don't need customer service to explain how to use your copy of, say, The Last Tycoon.

Report an editorial error

Report a technical issue

Tickers mentioned in this story

Study and track financial data on any traded entity: click to open the full quote page. Data updated as of 28/03/24 4:00pm EDT.

SymbolName% changeLast
AMZN-Q
Amazon.com Inc
+0.31%180.38
BBY-N
Best Buy Company
+0.2%82.03
MSFT-Q
Microsoft Corp
-0.17%420.72

Interact with The Globe