Best Buy reported first-quarter profit that beat expectations and reaffirmed its full-year outlook even as its sales fell short.
CEO Corie Barry said customers are “clearly feeling cautious and making tradeoff decisions” as they continue to deal with high inflation and low consumer confidence due to a number of factors.
“At the same time, in the first quarter, we continued to see our purchasing customer behavior remain relatively consistent in terms of demographics and the percentage of purchases categorized as premium,” she stated.
On the earnings call, Barry told analysts that Best Buy expects the calendar year to be “the bottom for the decline in tech demand.”
"We expect that next year, the consumer electronics industry will see stabilization and possibly growth following two down years," she said.
As for the reasons for her optimism, Barry noted that, on average, U.S. households now have twice as many connected devices as they did in just 2019. The retailer expects to begin to see the benefit of the natural upgrade and replacement cycles for the technology bought early in the pandemic, possibly later this year, depending on the macro environment, even more likely in calendar 2024 and 2025.
Earlier this month, the company announced it is overhauling its Totaltech annual membership program into a multi- tiered offering with a new name, new benefits and new prices.
Net income fell to $244 million, or $1.11 per share, in the quarter ended April 30, from $341 million, or $1.49 per share, in the year-ago period. Adjusted earnings per share of $1.15 were ahead of analysts of $1.10.
Total net sales declined 11% to $9.47 billion, missing expectations of $9.53 billion. Comparable sales declined 10.1%.
Best Buy’s domestic revenue decreased 11% to $8.80 billion, primarily driven by a comparable sales decline of 10.4%. The largest drivers of the comp sales decline on a weighted basis were computing, appliances, home theater and mobile phones. These declines were partially offset by growth in the gaming and services categories.
“Today we are reporting Q1 sales results that are right in line with the expectations we shared in March and profitability that was better than expected, demonstrating our strong operational execution,” stated Barry in the earnings release. “We continue to appropriately balance the need to adjust in response to the current industry sales trends with the need to invest so we can capitalize on opportunities as our industry moves through this downturn and returns to growth.”
The company affirmed its fiscal 2024 guidance ranges for earnings per share of $5.70 to $6.50, and revenue of $43.8 billion to $45.2 billion. It expects a comparable sales decline of 3% to 6%.
“As a reminder, our guidance assumed the consumer electronics industry would continue to feel the pressure of the broader macro environment and a high degree of uncertainty as it relates to the consumer,” said Matt Bilunas, Best Buy CFO. “At this point, we believe our sales align closer to the midpoint of the annual comparable sales guidance. It is still early in the year, so we will continue to watch the trends closely and adjust as necessary.”