Best Buy Q3 top estimates; inventory down 15% year-over-year
Best Buy reported top and bottom-line third-quarter results that topped analysts’ expectations.
The nation’s largest consumer electronics retailer also reiterated its outlook for the holiday quarter and raised its full-year outlook even as demand has softened across most of its categories, with the biggest drops in computing and home theatre products. And the chain is seeing the interest in sale events that other retailers are experiencing heading into the holidays.
“Value clearly matters to everyone,” Best Buy CEO Corie Barry said on the company’s earnings call. “The promotional environment continues to be considerably more intense than last year."
At a time when other retailers have struggled to deal with excess inventory, Best Buy improved its inventory positioning. Barry told investors that the company is tightly controlling its inventory, which was down 14.7% over a year earlier. (At the end of the second quarter, inventory was down 6% compared with the year-ago period.)
"We are well positioned and feel confident we will be able to react to quickly to changes we may see in customer demand,” she said.
Net income fell to $277 million, or $1.22 per share, in the quarter ended Oct. 29, from $499 million, or $2 per share, in the year-ago period. Adjusted earnings were $1.38 per share versus analysts estimates of $1.03 per share.
Net sales fell by about 11% to $10.59 billion, topping analysts estimates of $10.31 billion. Comparable sales were down 10.4%, less than expected.
Domestic revenue fell 10.8% to $9.80 billion, primarily driven by a comparable sales decline of 10.5%. Domestic online revenue of $3.04 billion decreased on a comparable basis. As a percentage of domestic revenue, online revenue was 31.0% versus 31.3% last year.
“Throughout the quarter, we were committed to balancing our near-term response to current conditions and managing well what is in our control, while also advancing our strategic initiatives and investing in areas important for our long-term growth,” stated Barry in the company’s earnings release. “We have strategically and effectively managed our inventory flow based on a shopping pattern that we believe looks more similar to historical holiday periods, with customer shopping activity concentrated on Black Friday week, Cyber Monday and the two weeks leading up to December 25.”
Similar to many other retailers, Best Buy cut its full-year outlook this year and said it expects same-store sales to fall approximately about 11% for its current fiscal year. The retailer now expects comparable sales to decline about 10%.