Best Buy Thursday missed Wall Street's quarterly sales expectations but highlighted higher profits and lower costs as weaker demand for consumer electronics continues.
Shares of the retailer gained 13% on Thursday.
The retailer beat earnings per share and maintained its full-year guidance. expected Revenue will range between $41.3 billion and $42.6 billion for the full year, which would mark a drop from the most recently completed fiscal year, when full-year revenue totaled $43.45 billion. The company said comparable sales will range from flat to down 3%.
On an earnings conference call, CEO Corie Barry said Best Buy expects 2024 “to be a year of increasing industry stabilization,” echoing comments the company first made in February. She said the retailer expects sales trends to “improve sequentially” over the next three quarters.
But, he added, the retailer still faces many challenges, including persistent inflation, high mortgage rates and the hangover from huge technology spending during the pandemic.
Here's how Best Buy fared in its fiscal first quarter compared to what Wall Street anticipated, according to a survey of analysts by LSEG:
- Earnings per share: $1.20 adjusted vs. $1.08 expected
- Revenue: $8.85 billion versus the expected $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. before. 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 same period a year earlier.
Best Buy's sales have been sluggish as the company deals with the fallout from about two years of unusually high sales during the Covid pandemic. The retailer has been in the middle of a waiting game for the replacement cycle for laptops, kitchen appliances and more to normalize, and for the debut of new tech gadgets to draw customers to its stores and website.
Barry said on the earnings call that the new devices will help increase enthusiasm and sales. For example, he pointed to Apple's new iPads and Microsoft laptops with the company's built-in Copilot artificial intelligence tool. Additionally, he said, the company plans to have a series of sales events from July through mid-September focused on students and parents who are shopping for laptops and other back-to-school items.
Like other retailers, Best Buy has noticed a pullback in purchases of discretionary items as consumers manage higher costs due to inflation.
Barry said customers continue to look for value and hold off when it comes to more expensive purchases. He said the quarter was more promotional than expected in both the number of deals and the size of discounts, with especially high promotions in certain categories, such as major appliances.
The company said it saw growth in its services and laptop categories.
Comparable sales, a metric that includes sales online and in stores open for at least 14 months, decreased 6.1% compared to the same period a year ago. Chief Financial Officer Matt Bilunas said on the company's earnings conference call that comparable sales declined 4.5% in February and 7% in both March and April.
In the United States, comparable sales fell 6.3% and online sales fell 6.1% year over year. Still, online sales accounted for nearly a third of total U.S. revenue in the quarter.
The company is pursuing newer businesses, including its subscription-based membership program. It relaunched My Best Buy as a three-tier program in late June. The lowest tier of the program is free, but the highest tier costs $179.99 per year for benefits, including 24-hour technical support, up to two years of product protection, and 20% off repairs, among other benefits.
The Minneapolis-based retailer has also cut spending. Earlier this year, Barry said the company would lay off workers and cut costs across the company. He did not 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 during the quarter, mostly related to severance or similar payments for employees who lost their jobs. He said he doesn't expect to have any other major charges related to those layoffs, which began in the company's fiscal fourth quarter.
As of early February, Best Buy had more than 85,000 employees. That's down from nearly 125,000 workers at the beginning of 2020 and more than 90,000 employees at the beginning of 2023, according to company financial documents.
The company also said in late February that it would close 10 to 15 stores in the fiscal year, after closing 24 in the previous one.
Meanwhile, Barry said the company is updating the look of stores across the chain. He said the “renovations” are not as expensive as complete store remodels, allowing the company to upgrade all locations rather than a limited number.
It is also reliant on suppliers as it reduces its workforce. For example, he said, Samsung is providing more experts in appliance departments at hundreds of Best Buy stores.
Best Buy on Thursday adjusted its full-year capital spending forecast to an estimate of $750 million, down from $800 million.
