Best Buy (BBY) earnings in the fourth quarter of 2024

Best Buy It beat Wall Street's revenue and profit expectations for the Christmas quarter on Thursday, even as the company endured a period of tepid demand for consumer electronics.

But the retailer warned of another year of weaker sales and said it would lay off workers and cut other costs across the business. Chief Executive Corie Barry offered few details about the cuts but said the company must ensure its workforce and stores match customers' changing shopping habits. The cuts will free up capital to invest back into the business and into newer areas such as artificial intelligence, she added.

“This is giving us some of that room to be able to reinvest in our future and make sure that we feel like we're really well positioned for the industry to start to recover,” he said on a call with reporters.

For this fiscal year, Best Buy anticipates revenue will range between $41.3 billion and $42.6 billion. That would mark a drop from the most recently completed fiscal year, when full-year revenue was $43.45 billion. He said comparable sales will range from a flat decline to a 3% decline.

The retailer plans to close 10 to 15 stores this year after closing 24 in the last fiscal year.

One challenge that will affect sales next year: It's a shorter week. Best Buy said the extra week last fiscal year increased revenue by about $735 million and boosted diluted earnings per share by about 30 cents.

Best Buy shares rose more than 3% in early trading and hit a 52-week high of $86.11 after the report.

Here's what the consumer electronics retailer reported for its fiscal fourth quarter of 2024 compared to what Wall Street expected, according to a survey of analysts by LSEG, formerly known as Refinitiv:

• Earnings per share: $2.72, adjusted compared to the expected $2.52
• Revenue: $14.65 billion vs. $14.56 billion expected

Best Buy has dealt with slower demand in part because of the strength of its sales during the pandemic. Like home improvement companies, Best Buy experienced skyrocketing spending as shoppers were stuck at home. Additionally, many items the retailer sells, such as laptops, refrigerators, and home theater systems, tend to be more expensive and less frequent purchases.

The retailer has also cited other challenges: Shoppers have been more selective about making large purchases while facing higher prices for food and other products driven by inflation. In addition, they have resumed dividing their money between services and goods after years of little activity during the pandemic.

Still, Best Buy delivered a better Christmas quarter than feared. In the three months ended Feb. 3, the company's net income fell 7% to $460 million, or $2.12 per share, from $495 million, or $2.23 per share. , in the same period of the previous year. Revenue fell from $14.74 billion a year earlier.

Comparable sales, a metric that includes sales online and in stores open for at least 14 months, declined 4.8% during the quarter as shoppers bought fewer appliances, cell phones, tablets and home theater systems than in the same period of the previous year. Games, on the other hand, were a strong sales category in the Christmas quarter.

In the US, Best Buy's comparable sales fell 5.1% and its online sales declined 4.8%.

During the quarter, traditional holiday shopping days were the strongest for Best Buy, Chief Financial Officer Matt Bilunas said on the company's earnings call. Comparable sales were down 5% year over year in November, but only 2% in December, during the gift-giving holiday. January was the weakest month during the quarter, with comparable sales falling 12%, he said.

Barry said customers “were very focused on deals during the holiday season.” Sales on days known for deep discounts like Black Friday and Cyber ​​Monday week were in line with expectations, but the lull in December sales was deeper than expected.

Demand was greater than the company had anticipated in the four days before Christmas.

In an earnings call, Barry said Best Buy expects next year to be one “of increasing stabilization of industry sales.”

He said the company is “focused on improving our customers' experiences and industry positioning,” as well as increasing its operating income rate. That metric is expected to improve next year.

Strength in service revenue, which includes fees from its annual membership program, installation and home repairs, has helped offset lower demand for new items. It's an area of ​​growth that the company expects to persist over the next year.

Some gains in its service business came from a switch to My Best Buy, a three-tier membership program that ranges in price from free to $179.99 per year, depending on perks and benefits.

The company eliminated home installations as a benefit of that program, which Barry said in a call with reporters led more people to choose to pay for that service.

At the end of the fiscal year, My Best Buy had 7 million paid members. He said customers who belong to the program spent more at Best Buy than those who don't.

Barry said Best Buy's services will help the retailer stand out, especially as customers look for guidance as artificial intelligence becomes part of more devices.

The retailer has been waiting for customers to upgrade and replace their consumer electronics following the pandemic-induced surge. There are some signs that the cycle has begun, Barry said on the earnings conference call. For example, he said, year-over-year comparable sales of laptop computers turned positive in the fiscal fourth quarter and remained positive in the first quarter.

He also cited other positive indicators, including cooling inflation and “green shoots” in the housing market. Sales at Best Buy are not directly correlated with the housing market, which has seen slower turnover, but home purchases tend to spur purchases of appliances and televisions, he said.

Best Buy paid dividends of $198 million and spent $70 million on share buybacks during the period. On Thursday, the company said its board of directors had approved a 2% increase in the regular quarterly dividend to 94 cents per share, which will be paid in April.

As of Wednesday's close, Best Buy shares are up nearly 2% so far this year. The company has underperformed the S&P 500's earnings by about 6% over that period. Best Buy shares closed Wednesday at $79.68, bringing the company's market value to $17.16 billion.

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