Best Buy sales miss amid inventory, staffing woes; gives upbeat long-term outlook

Best Buy Co.’s fourth-quarter sales declined amid Omicron-related staffing and supply chain challenges that constrained inventory more than expected, including some high-demand holiday items.

The consumer electronics giant gave a weaker-than-expected short-term outlook, noting that it follows a period of very high demand, which was brought on by the pandemic and stimulus checks. But during the next several years, the company expects to see demand return to levels higher than pre-pandemic sales, driven by investments in its new Totaltech membership program and health care.

“The two largest variables in our FY23 financial outlook on a year-over-year basis are the short-term industry decline as we lap high growth and government stimulus, and the investment in our new membership program, Best Buy Totaltech, which we believe will drive longer-term value,” said CFO Matt Bilunas. “As we look to FY25, we expect the consumer electronics industry will return to the level we saw this past year, which is much higher than pre-pandemic levels, and that Totaltech, Best Buy Health and other initiatives will drive meaningful growth.”

Best Buy reported that its net income fell to $626 million, or $2.62 per share, for the quarter ended Jan. 29, from $816 million, or $3.10 per share, in the year-ago period. Adjusted earnings per share of $2.73 were in line with analysts’ estimates.

Net sales decreased 2.3% to $16.37 billion from $16.94 billion a year earlier, missing estimates. Same-store sales fell 2.3%

“Q4 sales of $16.4 billion were impacted by more constrained inventory than expected, including some high-demand holiday items, and the temporary reduction in store hours in January due to Omicron-induced staffing challenges,” said CEO Corie Barry. “We are deliberately investing in our future and furthering our competitive differentiation which, as expected, impacted our Q4 profitability.

Barry noted that the biggest areas of investment were the company’s new BestBuy Totaltech membership program, technology and Best Buy Health, “all core to our future growth potential,” she said.

[Read More: Best Buy targets older adults with mobile health offering]

For the year ahead, Best Buy expects revenue of $49.3 billion to $50.8 billion, below the $51.05 billion expected by analysts. Adjusted earnings per share will be between $8.85 and $9.15 for the full year, also lower than expected.

Best Buy expects same-store sales to decline from 1% to 4% during the coming year.