best buy Wall Street shares on Tuesday beat quarterly sales forecasts, but softened their forecasts for the rest of the year as they feel a post-pandemic spending slump on kitchen appliances, computer monitors and other electronics.
Chief Executive Cory Barry said the company still expects this year to be “the low point in demand for the technology” before sales rebound.
“In the coming year, the consumer electronics industry should experience stability and possibly growth driven by natural upgrade and replacement cycles and the normalization of technological innovation,” she said in a press release.
Here’s what the company did for the fiscal second quarter that ended July 29, compared to what Wall Street was expecting, based on a survey of analysts conducted by Refinitiv:
- Earnings per share: $1.22 adjusted vs. $1.06 expected
- Revenue: $9.58 billion vs. $9.52 billion expected
The company’s stock rose more than 5% in early trading Tuesday to nearly $80 a share.
Best Buy is seeing a return to pre-pandemic sales levels, as consumers return to more typical spending patterns and feel pressure on their balance sheets due to inflation. is similar to Home Depot And LouieBest Buy has made huge gains during the Covid crisis, fueled by big purchases that people don’t make often.
Over the past year, the consumer electronics retailer has felt the effects of inflation and consumers shifted to spending on experiences. It ended last year’s period when it paused stock buybacks and cut store jobs across the country after lowering its outlook. (The company resumed buybacks late last year.)
In the most recent three-month period, Best Buy’s net income fell to $274 million, or $1.25 per share, from $306 million, or $1.35 per share, a year earlier.
Net sales decreased in the quarter from $10.33 billion in the same period last year.
Similar sales, a key metric that includes online and in-store sales that have been open for at least 14 months, fell 6.2% year-over-year as customers bought fewer appliances, home theaters and mobile phones. On the other hand, the company said, gaming systems were the sales drivers in the quarter.
Online sales in the US fell 7.1% year-on-year, but continued to drive a large portion of the company’s business. And e-commerce accounted for nearly a third of the retailer’s total revenue in the United States, which is roughly in line with last year’s share.
The retailer has narrowed its forecast for the full year. It said it now expects revenue to range from $43.8 billion to $44.5 billion. It had previously forecast between $43.8 billion and $45.2 billion. For like sales, it expects a decline of 4.5% to 6% instead of the previous guidance of 3% to 6%.
However, it raised its earnings forecast slightly. She said she expects adjusted earnings per share of $6 to $6.40 instead of prior guidance of $5.70 to $6.50.
On the earnings call with investors, CFO Matt Belunas said sales trends are improving, and the company feels optimistic that may continue in the back half of the year. Going back to school, he said, was “a little bit better than we expected.” In the second quarter, he said, the volume of laptops and TVs sold by the company was flat and did not decline.
Best Buy has explored new categories, such as healthcare, and launched its paid subscription program, My Best Buy, to continue driving growth. That contributed to a slightly better gross profit rate for its US business in the quarter, as it benefited from those higher margin businesses.
On the call with investors, Barry said the company has been seeing positive momentum since relaunching My Best Buy as a three-tiered program in late June, including year-over-year paid membership growth. The lower level of the program is free, but the higher level costs $179.99 per year.
The retailer has re-evaluated its store footprint as online sales drive up costs. In a call with investors, Barry said the company is on track with its actual plans for the fiscal year. The company plans to close 20 to 30 stores, redesign eight stores into more experimental stores and expand the outlet stores from 19 to around 25 stores.
And as it gears up for the holidays, Barry said Best Buy expects shoppers to return to “pre-pandemic behavior,” such as “looking for great deals, resting, and traffic will be directed toward promotional events.”
Best Buy shares closed Monday at $74.07, bringing the company’s market capitalization to $16.16 billion. So far this year, the company’s stock is down nearly 8%. That contrasts with the S&P 500’s gains of about 15% over the same period.
Correction: My Best Buy’s top tier costs $179.99 per year. An earlier version miscalculated the cost.