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Key Takeaways
- Best Buy has invited Ikea to set up shop in 10 of its locations and is testing small-store formats as it eyes excess retail space.
- The electronics retailer reported third-quarter results that beat expectations and raised its outlook for the full-year.
Are you overwhelmed by Ikea’s mazy showrooms? Help is on the way—from a home-electronics chain.
Best Buy (BBY) added 1,000-square-foot Ikea showrooms in 10 of its stores earlier this month, according to CEO Corie Barry. Ikea workers help staff the areas, which display Ikea kitchen and laundry room merchandise, as well as Best Buy appliances. The pilot program, which the companies said marked the first time another U.S. retailer has offered Ikea products, is one way Best Buy is trying to make use of its excess retail space, Barry said on a conference call Tuesday.
The pact creates “innovative ways for both of us to meet customer needs in a changing environment,” said Barry, according to a transcript made available by AlphaSense. “A multitude of partners” might be interested in a similar arrangement, Barry said.
Why This News Matters to Investors
As consumers gravitate to online shopping, some retailers are rethinking the big-box stores they’ve built. Companies such as Target and Walmart, have used retail space for fulfilling delivery orders. Best Buy has another idea: bringing in a well-known furniture seller.
The stores—which the home furnishings and meatballs company called a “cross-brand retail experience”—are planned for 10 Texas and Florida markets, Ikea said earlier this month.
The home-electronics and appliance retailer has been working on a range of ideas for building its business, including smaller store formats. “We like what we’re seeing in those small format stores,” Barry said, according to the transcript. “I would expect us to lean into those a bit as we head into next year.”
Computers, cell phones, headphones and gaming products like Nintendo Switch 2 sold well in the third quarter, but home theater, appliances and drones did not, Barry said. Consumers remain selective with their dollars, and the company expects fourth-quarter profits to dip compared to last year due to promotional spending. Still, Best Buy raised its full-year forecast.
“Customers remain resilient, but deal focused and attracted to more predictable sales moments including our back-to-school sales events and our Techtober sales,” Barry said, according to the transcript.
Sales grew 2.4% year-over-year to nearly $9.67 billion in the third quarter of Best Buy’s fiscal year. Analysts were anticipating about $9.58 billion in sales, according to consensus analyst estimates compiled by Visible Alpha.
That translated to $1.40 in earnings adjusted for restructuring and losses from Best Buy’s health business. Analysts were looking for $1.30 in adjusted earnings per share, per Visible Alpha.
Shares of Best Buy were recently up nearly 6%, but remain down about 7% so far this year.
