best buy on Thursday beat Wall Street’s quarterly earnings expectations, but its sales fell short of estimates and it reiterated expectations for weaker spending consumer electronics this year.
Shares of the company were up about 3% in late afternoon trade.
The retailer confirmed its outlook shared in March. Full-year revenue is expected to be between $43.8 billion and $45.2 billion, down from last fiscal year and a comparable revenue decline of between 3% and 6%.
In a phone call with analysts, CEO Corie Barry said shoppers are compromising by buying some items and skipping others as shoppers face higher prices for housing, food and fuel.
“We’ve seen one consumer, whether you call it a recession or not, exhibiting some recessionary behaviors,” she said.
But Barry said the Minnesota-based retailer expects the calendar year to “hit the bottom for the decline in tech demand.” She said sales are picking up again as homes now have far more connected devices than before the pandemic. The emergence of innovative products and the aging of items customers have in their homes would also drive replacement or new purchases, she said.
Here’s how the company performed for the three-month period ended April 29, compared to Wall Street expectations, based on a Refinitiv analyst poll:
- Earnings per share: Adjusted $1.15 vs. $1.11 expected
- Revenue: $9.47 billion versus $9.52 billion expected
Best Buy is the latest retailer to provide an update on the American consumer. In the past week, numerous retailers, including walmart, Goal And home depothave spoken of more price-sensitive shoppers who are less willing to spend on expensive or discretionary items – especially compared to the stimulus-packaged years of the Covid pandemic.
As a consumer electronics retailer, Best Buy is more vulnerable to this decline because many of the items it sells are priced higher and aren’t replaced frequently.
Best Buy’s net income fell to $244 million, or $1.11 per share, in the first quarter, compared to $341 million, or $1.49 per share, a year earlier.
Net sales declined to $9.47 billion for the quarter, down 11% from $10.65 billion in the year-ago period, and fell short of Wall Street expectations.
According to StreetAccount, comparable sales declined 10.1% for the quarter, in line with the decline investors were expecting.
Revenue trends were strongest in February and then weakened later in the quarter, CFO Matt Bilunas said at the analyst call. He said sales trends improved in the first three weeks of the second quarter compared to April.
Other retailers, including Target and Foot Locker, also spoke of a decline in sales during the quarter but didn’t see a rebound as the second quarter began.
With people buying fewer and fewer TVs, smartphones, or home theater systems, Best Buy has been looking for other ways to make money. Earlier this year, the company inked a deal with Atrium Health, a North Carolina-based healthcare system, to sell equipment and install it for a program that allows patients to receive hospital care at home. The company recently relaunched its My Best Buy membership program, which charges a subscription fee and includes features like tech support, expanded returns options, and early access to current products.
The retailer is also transitioning its workforce as it manages costs and adapts to shopper preferences.
According to Barry, online sales accounted for about a third of the company’s sales in the United States in the first quarter. That proportion has remained stable over the past two years and is double what it was before the pandemic, she said.
Stores still play a big role, even as more and more customers shop online. About 40% of those digital purchases were picked up in-store, even though nearly 60% of the company’s packages were delivered within two days.
The company laid off hundreds of store employees in April. The retailer declined to provide the number.
In the past three years, Best Buy’s workforce has shrunk. At the end of January, Best Buy employed more than 90,000 people in the United States and Canada. That’s down from the nearly 125,000 employees the company had in early 2020, according to the company’s financial records.
Most of this was due to workers quitting their jobs and the company choosing not to fill the positions, Barry said.
“We just knew that store volumes would probably never return to pre-pandemic levels,” she said. She added that Best Buy wants to put more employees in roles that involve interacting with customers.
Best Buy shares closed at $69.15 on Wednesday, taking the company’s market value to $15.12 billion. So far this year, the stock is down about 14%, trailing the 7% gains of the S&P 500 and the 2% declines of the retail-focused XRT over the same period.