Electronics demand continued to cool this fall, and Best Buy Co. executives predicted the retailer’s holiday season will be more normal in contrast to the frenzy of the past two years.
Best Buy customers will likely begin their holiday shopping this Black Friday and be able to take advantage of sale prices in coming weeks, the executives said Tuesday as they disclosed quarterly results that were better than expected.
“Last year, everyone was yelling that inventory would not be available and so everyone was pushing to buy early,” Best Buy CEO Corie Barry said. “That impetus to purchase just isn’t there this year.”
Best Buy said it earned $277 million in the August-through-October quarter, down from $499 million a year ago. Revenue fell 11.5%, while comparable sales dropped 10.4%.
Its adjusted per-share profit of $1.38 beat analysts’ forecasts of $1.03. Best Buy shares rose nearly 13% to $79.88, the highest level since Aug. 18, helping drive broader gains in stocks Tuesday.
While some customers are trading down to cheaper versions of products in certain categories, like televisions, that’s not happening across the board, Barry said.
“We’re actually seeing the consumer behave relatively similarly as we did even pre-pandemic,” she said.
Best Buy’s revenue in the latest quarter was 8.4% higher than in the same period of 2019, before the pandemic.
With performance not as bad as predicted, executives slightly raised their outlook for the full fiscal year to be a 10% decline in comparable sales compared to last year, instead of a 11% decline.
“It was certainly less bad than feared,” said Anthony Chukumba, an analyst at Chicago-based Loop Capital Markets.
Best Buy resumed its share repurchases in November. And its inventory position is better than a lot of other national retailers. Inventory value was down almost 15% from last year when it stockpiled items early last holiday season because of supply chain problems.
“I would much rather have them come out and say ‘Hey, we are a little light on inventory’ than ‘We are swimming in it,’ like Walmart and Target,” Chukumba said.
Sales declined across almost all of Best Buy’s categories this fall, with some of the biggest drops in the computing and home theater categories. The promotional environment was more intense than last year as the industry continues to deal with softer demand and more inventory, Barry said.
Best Buy saw a boom in sales (an increase of 23%) in the fall of 2020 when people were forced to stay home and upgraded their home technology. In fall 2021, Best Buy continued to build on its momentum with comparable sales rising about 2%.
But this year, there has been a noticeable shift in consumer demand as more American families struggle with high inflation. Retailers have reported a pullback by shoppers in buying non-essential items so they can afford necessities like groceries.
Best Buy continues to experiment with new store formats such as outlet stores and services. It has started a pilot in which it partners with a home builder to provide home technology such as appliances and connected doorbells.
Best Buy is also growing its health business. Last week, digital health company Coeus h3c announced Best Buy made an initial investment in the firm to use Coeus’ cloud-based IT and logistics platform to help customers access Best Buy’s home health devices and solutions.
The company is also continuing to cut costs. Best Buy had $26 million of restructuring costs this quarter, primarily related to employee termination benefits. It hasn’t announced the exact number of employees who have been let go. The company incurred $34 million in restructuring costs in the May-through-July quarter and cut hundreds of in-store jobs.