Online Shopping Dominates Holiday Sales Results so Far

Best Buy cuts sales forecast, as holiday shoppers hunt for deals

Best Buy revised its full-year sales expectations downward on Tuesday, citing a subdued demand environment and gearing up for cost-conscious holiday shoppers. Despite surpassing quarterly earnings predictions, the consumer electronics retailer fell short of revenue projections.

Best Buy cuts sales forecast, as holiday shoppers hunt for deals

The company now anticipates fiscal year revenue to be in the range of $43.1 billion to $43.7 billion, a reduction from the previous estimate of $43.8 billion to $44.5 billion. Best Buy also revised its comparable sales forecast, expecting a decline between 6% and 7.5%, compared to the earlier guidance of a 4.5% to 6% decrease. The upper end of the profit forecast was adjusted downward, with expected earnings per share now ranging from $6 to $6.30, down from $6 to $6.40.

CEO Corie Barry acknowledged the company's anticipation of softer consumer electronics sales this year. However, she highlighted the challenges posed by the Federal Reserve's efforts to curb inflation through interest rate hikes, resulting in unpredictable and uneven consumer demand.

In preparation for the holiday season, Barry emphasized Best Buy's readiness for deal-focused customers, offering promotions and deals catering to various budgets.

In the fiscal third quarter, Best Buy outperformed expectations in adjusted :

• Earnings per share, reporting $1.29 compared to the anticipated $1.18
• Revenue fell short at $9.76 billion against an expected $9.90 billion

Similar to home improvement retailers, Best Buy is experiencing a moderation in demand following a surge in purchases of electronics and appliances during the Covid pandemic. Consumer preferences have shifted towards experiences and essential expenditures due to inflation, impacting discretionary purchases.

CEO Barry previously signaled this fiscal year as a potential low point in tech demand before an expected rebound. Despite the decline, Best Buy, known for attracting higher-income customers, has mitigated the impact compared to the broader population.

During an earnings call, Barry noted that while some customers opted for more affordable TVs, the company did not witness a significant shift in other categories. The proportion of revenue from premium products and purchases over $1,000 remained stable compared to the previous year.

Consumer electronics deals have become more prevalent, with industry promotions and discounts increasing compared to the previous year and the pre-pandemic fiscal year of 2020.

For the three months ending Oct. 28, Best Buy reported a net income drop to $263 million, or $1.21 per share, from $277 million, or $1.22 per share, in the same period the previous year. Revenue also decreased from $10.59 billion to $9.76 billion year-over-year.

Comparable sales, including online and in-store sales open for at least 14 months, declined by 6.9% year-over-year and 7.3% in the U.S., attributed to reduced purchases in appliances, computers, home theaters, and mobile phones. However, there was growth in gaming sales.

Best Buy's U.S. online sales declined by 9.3%, but despite lower merchandise demand, the company achieved higher profitability through its annual membership program, products with better margins, and reduced supply chain costs.

Best Buy's stock closed at $68.11 on Monday, marking a 15% decline year-to-date, underperforming the S&P 500's 18% gain during the same period.