Best Buy customers on a tight budget have smashed sales and pursued low prices, eroding the company’s sales and profits this summer.
On Tuesday, the Richfield-based electronics retailer said it earned $306 million in its second fiscal quarter, which ended July 30, down 58% from a year ago. Managers last month low expectations for investors.
“We expected our financial results to be softer this year as we exceeded some of the record sales volume we saw: but the macro environment is more challenging and certainly more erratic than we expected,” said Best Buy CEO Corie Barry. meet with journalists.
Still, Wall Street expected worse. Best Buy’s adjusted earnings per share of $1.54 came in better than analysts’ forecast of $1.27. Revenue of $10.3 billion fell nearly 13%, beating analysts’ estimate of $10.2 billion.
Best Buy share prices rose 1.6% on Tuesday.
“What you’re seeing today is some relief from the investment community that things aren’t getting any worse,” said Joe Feldman, research analyst at Telsey Advisory Group.
A month ago, Best Buy executives said they expected comparable sales to fall 13%, down from the previously estimated 8%. The new forecast was on target: Best Buy’s comparable sales fell 12.1%. In the second quarter of last year, comparable sales increased by almost 20% compared to the 2020 period.
Despite the dips, Best Buy’s revenue is better than it was before the pandemic, when revenue was $9.5 billion for the quarter.
Best Buy executives expect comparable sales to fall faster this fall than this summer. For the full fiscal year, they maintained a comparable sales decline forecast of approximately 11%.
Barry said computer and home theater are experiencing bigger declines in sales. Best Buy is also seeing more people looking for discounts. High demand during the pandemic meant Best Buy didn’t need to lower prices that much, but now their promotions are back to pre-pandemic levels.
“People are just trying to bring food to the table and pay for the gas to work,” Feldman said. “And they’re optional [spending] It just slowed down overall, but you’ve seen that in electronics in particular.”
Barry said this holiday season, retailers will likely see similar shopping behavior to the holidays before the pandemic, with consumers driving sales and less of an impetus to shop early.
Feldman noted that Best Buy’s stock level remains relatively healthy, down 6% from last year, unlike many other retailers struggling with a backlog of slow-selling items.
But Mike Baker, senior retail analyst at DA Davidson Cos, said Best Buy will face a more competitive pricing environment, especially during the holidays, as other retailers have to offload products.
“Best Buy’s inventory looks better … but its competitors have a lot of consumer electronics inventory and therefore they need to grade their products,” he said.
Best Buy continues to experiment with different store models. Last month, opened A small format store near Charlotte, NC where customers can use their smartphones to shop. Best Buy has also increased the number of new outlet stores where they offer refurbished and returned products.
During the quarter, the retailer opened two new outlet stores and then opened another one in August, bringing the number to 19. It has also reshaped more than a handful of stores to offer more experience-based shopping.
Best Buy earlier this month cut hundreds of in-store jobs manages costs. In the quarter, the company suffered restructuring costs of $34 million, primarily in layoffs.
Barry said the company hopes to retain many of its employees by putting them in other open roles at the company. Managers expect additional year-round fees for restructuring, which may suggest that more staff changes may be on the way.
“We’re looking at everything end-to-end at the service of a business model that is changing at an incredible pace,” Barry said. Said.
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