Best Buy reduced its sales projection for the entire year on Tuesday as it gets ready for budget-conscious holiday shoppers and weathers a period of slower demand.
While revenue was lower than expected, the retailer of consumer electronics outperformed Wall Street’s expectations for quarterly earnings.
Best Buy stated that it has revised its revenue projections for the fiscal year, which were previously between $43.8 billion and $44.5 billion to $43.1 billion to $43.7 billion. The retailer stated that, contrary to its earlier projection of a 4.5% to 6% decline, it now expects comparable sales to fall by between 6% and 7.5%.
Additionally, it reduced the upper bound of its profit guidance, stating that it now anticipates adjusted earnings per share to be between $6 and $6.30 as opposed to $6 and $6.40.
In a press release, CEO Corie Barry stated that Best Buy expected lower sales of consumer electronics this year. But consumer demand “has been even more uneven and difficult to predict,” she said, as the Federal Reserve continues its campaign to curb inflation by hiking interest rates.
The retailer, she said, is “prepared for a customer who is very deal-focused with promotions and deals for all budgets” and is ready for the holiday season.
The following describes the company’s performance for the fiscal third quarter in relation to Wall Street’s expectations based on an analyst survey conducted by LSEG, formerly known as Refinitiv:
- Earnings per share: $1.29 adjusted compared to $1.18 predicted.
- Revenue: $9.76 billion as opposed to the anticipated $9.90 billion.
Similar to other home improvement stores, Best Buy is witnessing a slowdown in demand due to years of higher purchases of appliances, home theater systems, and computer monitors during the Covid pandemic. In addition to returning to spending on experiences like plane and concert tickets, customers are also spending more on necessities like food due to inflation, leaving them with less money for discretionary purchases.
Prior to the current fiscal year marking “the low point in tech demand,” Barry had informed investors that she anticipated a resurgence in purchases.
Because Best Buy typically attracts customers with higher incomes than the overall population, it has helped keep consumer spending from falling even further as inflation takes a toll. During a quarterly earnings call with investors, Barry stated that while some customers opted for less expensive TVs, the company did not witness as much trade-down in other categories. According to her, the percentage of sales over $1,000 and the percentage of revenue from premium products remained consistent when compared to the same period last year.
On the other hand, sales on consumer electronics have increased. According to Barry, industry discounts and promotions have increased when compared to the previous year and the 2020 fiscal year before the pandemic.
Best Buy reported that its net income for the three months ended October 28 decreased to $263 million, or $1.21 per share, from $277 million, or $1.22 per share, during the same period last year. Revenue decreased from $10.59 billion in the previous year.
Consumers purchased fewer computers, mobile phones, home theater systems, appliances, and computers, which resulted in a 6.9% year-over-year decline in comparable sales, an industry metric that takes into account sales at stores open for at least 14 months as well as sales made online. According to the company, gaming sales have increased.
In the US, Best Buy’s online sales fell by 9.3%.
Best Buy increased its profitability despite a decline in the demand for its products because it generated revenue from its yearly membership program, sold goods with better margins, and had lower supply chain expenses.
On Tuesday, Best Buy’s stock closed at $67.62, down less than 1%. The company’s stock has dropped roughly 16% so far this year, underperforming the S&P 500’s gains of 18% over the same time period.
