Best Buy cuts full-year sales outlook, prepares for price-conscious holiday shoppers
The consumer electronics retailer Best Buy has cut its full-year sales outlook as it deals with softer demand and prepares for price-conscious holiday shoppers. Although the company surpassed Wall Street’s expectations for quarterly earnings, it fell short on revenue.
Best Buy now expects revenue to range from $43.1 billion to $43.7 billion for the fiscal year, down from its previous range of between $43.8 billion to $44.5 billion. The retailer also anticipates comparable sales to decline by between 6% and 7.5%, lower than its previous guidance of a 4.5% to 6% drop. Additionally, the high end of its profit guidance has been lowered, with adjusted earnings per share now expected to range from $6 to $6.30 instead of between $6 and $6.40.
CEO Corie Barry acknowledged that Best Buy had anticipated softer sales of consumer electronics this year, but consumer demand has been even more uneven and difficult to predict due to high inflation and the Federal Reserve’s campaign to cool down spending. Barry stated that the company is prepared for a customer base that is very deal-focused and has promotions and deals available for all budget ranges.
In the fiscal third quarter, the company’s adjusted earnings per share were $1.29, compared to the expected $1.18, while revenue amounted to $9.76 billion, falling slightly short of the expected $9.90 billion.
Like home improvement retailers, Best Buy is experiencing moderate demand after years of increased purchases of computer monitors, home theaters, and appliances during the Covid pandemic. Barry previously forecasted that this fiscal year would be “the low point in tech demand” before purchases pick up again.
In the most recent three-month period, Best Buy reported that net income dropped to $263 million, down from $277 million in the year-ago period. Revenue also fell from $10.59 billion in the prior year’s period. Comparable sales fell by 6.9% year over year and 7.3% in the U.S., with the only growth being in gaming sales. Online sales also declined by 9.3% in the U.S.
Despite lower demand for merchandise, Best Buy achieved higher profitability by making money from its annual membership program, selling products with more favorable margins, and reducing supply-chain costs.
Best Buy’s stock closed at $68.11 on Monday, marking a 15% decline in the company’s stock so far this year, which is underperforming the 18% gains of the S&P 500 during the same period.
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