Best offer on Thursday missed Wall Street’s quarterly sales expectations but highlighted higher profits and lower costs amid continued lower demand for consumer electronics.
The retailer’s shares rose 13% on Thursday.
The retailer beat earnings per share and maintained its full-year forecast. He’s waiting full-year revenues will be between $41.3 billion and $42.6 billion, which would represent a decline from the most recently ended fiscal year, when full-year revenues were $43.45 billion. The company said comparable sales would range from flat to a 3% decline.
In an earnings call, CEO Corie Barry said Best Buy expects 2024 “to be a year of increasing stability in the industry,” echoing comments the company first made in February. She said the retailer expects “sequential improvement” in sales trends over the next three quarters.
But she added that the retailer still faces many challenges, including persistent inflation, high mortgage rates and a hangover from overspending on technology during the pandemic.
This is how Best Buy did in the first quarter of its fiscal year compared to Wall Street expectations, based on a survey of analysts conducted by LSEG:
- Earnings per share: Adjusted $1.20 vs. expected $1.08
- Income: $8.85 billion dollars against the expected USD 8.96 billion
The company’s net income for the three months ended May 4 rose slightly to $246 million, or $1.13 per share, from $244 million, or $1.11 per share, a year earlier. After adjusting for one-time items, including restructuring charges, Best Buy reported earnings of $1.20 per share.
Net sales fell to $8.85 billion from $9.47 billion in the year-ago period.
Best Buy’s sales are snail-paced as the company deals with the fallout from about two years of unusually high sales during the Covid pandemic. The retailer is in the middle of a waiting game for the replacement cycle for laptops, kitchen appliances and other appliances to normalize and for the debut of modern tech gadgets that will entice customers to visit its stores and website.
During an earnings call, Barry said the modern devices will aid drive interest and sales. For example, she pointed to modern Apple iPads and Microsoft laptops with built-in Copilot artificial intelligence tool. Additionally, she said, the company plans to host a series of sales events from July through mid-September focusing on students and parents shopping for laptops and other items needed for back-to-school.
Like other retailers, Best Buy has seen a decline in purchases of discretionary items as consumers cope with higher costs due to inflation.
Barry said customers are still looking for value and are holding off on more exorbitant purchases. She said the quarter was more promotional than expected, both in the number of transactions and the size of discounts, with particularly sturdy promotions in some categories such as immense home appliances.
The company said it has seen growth in its services and laptop categories.
Comparable sales, an indicator that includes sales online and in stores open at least 14 months, fell 6.1% compared to the year-ago period. Chief Financial Officer Matt Bilunas said during the company’s earnings call that comparable sales fell 4.5% in February and 7% in March and April.
In the U.S., comparable sales declined 6.3% and online sales declined 6.1% year-over-year. Still, online sales accounted for nearly a third of total U.S. revenues in the quarter.
The company is looking for modern business, including a subscription-based membership program. In tardy June, the My Best Buy program relaunched as a three-tier program. The lowest tier of the program is free, but the highest tier costs $179.99 per year and includes additional benefits including 24/7 technical support, up to two years of product protection, and 20% off repairs.
The Minneapolis retailer also cut expenses. Earlier this year, Barry said the company would lay off workers and cut costs across the company. She didn’t specify the number of layoffs, but said Best Buy would invest in areas that could drive growth, such as artificial intelligence.
Best Buy said it spent $15 million on restructuring costs in the quarter, mostly related to severance or similar compensation for employees who lost their jobs. It said it did not expect any other significant charges related to the layoffs, which began in the company’s fiscal fourth quarter.
At the beginning of February, Best Buy had more than 85,000 employees. That’s down from nearly 125,000 employees at the start of 2020 and more than 90,000 employees at the start of 2023, according to the company’s financial filings.
In tardy February, the company also said it would close 10 to 15 stores in the fiscal year, after closing 24 in the previous year.
Meanwhile, Barry said the company is updating the look of stores across the chain. She said “refreshes” are not as costly as full store remodels, which allows the company to upgrade all locations rather than a restricted number of them.
It also relies on suppliers, limiting its workforce. For example, she said, Samsung is bringing more experts to the appliance departments at hundreds of Best Buy stores.
Best Buy on Thursday revised down its full-year capital spending forecast to an estimated $750 million, down from as much as $800 million.
