Best Buy cuts outlook amid softer demand even as sales top Street

Best Buy reported lower first-quarter sales and profits and lowered its full-year forecast citing softer demand.

The consumer electronics giant noted that, as shared as its investor update in March, it expected its current fiscal year financial results to be softer than last year as it laps stimulus and other government support, the CE industry cycles, the last two years of unusually strong demand and continued investments in its future. It also planned for increased promotional activity and higher supply chain expenses.

“Macro conditions worsened since we provided our guidance in early March which resulted in our sales being slightly lower than our expectations,” CEO Corie Barry said in a statement. “Those trends have continued into Q2 and, as a result, we are revising our sales and profitability expectations for the year.”

On a media call, Barry said that, similar to other retailers, Best Buy is “seeing some increasing signals of concern” as consumers feel pressure from rising prices and higher mortgage rates. Consumers are also spending more on experiences, such as vacations, than they did during the pandemic.

The company’s net income fell to $341 million, or $1.49 per share, for the quarter ended April 30, down from $595 million, or $2.32 per share, a year earlier. Adjusted earnings were $1.57 per share, missing the $1.61 analysts had expected.

Net sales declined 8.5% to $10.65. Analysts had expected sales of $10.41 billion. Total same-store sales were down 8%.

Domestic online revenue fell 4.9% on a comparable basis and accounted for 30.9% of the same.

“Even with the expected slowdown this year, we continue to be in a fundamentally stronger position than we were before the pandemic from both a revenue and operating income rate perspective,” Barry stated. “We have a unique value creation opportunity and are investing now, as we have successfully invested ahead of change in our past, to ensure we’re ready to meet the needs of our customers and employees and retain our unique position in our industry.”

Best Buy has been expanding its merchandise assortment, entering new categories such as skin-care technology and ramping up its health-related and fitness offerings, with digital-health technology and health-monitoring services a critical feature of its overall strategy. The retailer also plans to double its outlet store count during the next year, expanding from its current 16 locations to 32. The company is also expanding its services. Last year, it rolled out an annual membership program.

Best Buy now expects full-year earnings in the range of $8.40 to $9 per share, with revenue in the range of $48.3 billion to $49.9 billion. Previously, it expected earnings per share of $8.85 to $9.15 and revenue of $49.3 billion to $50.8 billion. Analysts were looking for earnings per share of $8.88 and revenue of $50.17 billion for the year.

“We are revising our full-year financial guidance to reflect our best estimate of how the year will play out based on the trends we have been seeing over the past several weeks and our forecast for the back half of the year at this point in time,” stated Best Buy CFO Matt Bilunas. “We will continue to proactively navigate this rapidly changing environment, balancing the day-to-day operations with our commitment to our long-term strategy and growth initiatives.”