Best Buy surpassed Wall Street’s sales expectations for the quarter, but its outlook for the rest of the year is tempered due to reduced demand for kitchen appliances, computer monitors, and electronics in the post-pandemic period. CEO Corie Barry believes that this year will be the low point in tech demand, with stabilization and growth expected in the consumer electronics industry next year.
Here’s how Best Buy performed in the fiscal second quarter compared to Wall Street’s expectations:
– Earnings per share: $1.22 adjusted vs. $1.06 expected
– Revenue: $9.58 billion vs. $9.52 billion expected
Best Buy’s stock increased by over 5% in early trading, reaching almost $80 per share. The company is experiencing a return to pre-pandemic sales levels as consumers adjust their spending patterns and face budget constraints due to inflation. Similar to Home Depot and Lowe’s, Best Buy had significant gains during the COVID-19 pandemic, driven by one-time big purchases.
Over the past year, Best Buy has faced inflationary pressures and a shift in consumer spending towards experiences. The company’s net income for the recent quarter declined to $274 million, with net sales dropping from $10.33 billion compared to the previous year. Comparable sales, which include online and in-store sales, decreased by 6.2% as customers purchased fewer appliances, home theaters, and mobile phones. However, gaming systems performed well during the quarter.
Despite a 7.1% year-over-year decline in online sales, e-commerce remains a significant part of Best Buy’s business, accounting for almost a third of its total revenue in the U.S. The company has adjusted its full-year outlook, anticipating revenue to range from $43.8 billion to $44.5 billion, with a decline in comparable sales of 4.5% to 6%. However, it slightly raised its profit expectations.
Best Buy has introduced new revenue streams, such as health care and its My Best Buy paid subscription program, to drive growth. The company’s gross profit rate for its U.S. business improved in the quarter due to these higher-margin businesses. Best Buy has also reconsidered its store footprint, planning to close some stores, remodel others into experiential shops, and expand outlet stores.
Looking ahead to the holiday season, Best Buy expects shoppers to return to pre-pandemic behaviors, focusing on great deals and convenience. The company’s stock has experienced a decline of nearly 8% this year, contrasting with the S&P 500’s gains of approximately 15% during the same period.
Correction: The top tier of the My Best Buy program costs $179.99 per year. An earlier version misstated the cost.
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