Best Buy on Thursday topped Wall Street’s quarterly earnings expectations, but its sales missed estimates and it reiterated expectations for weaker spending on consumer electronics this year.
The company’s shares rose more than 2% in early trading Thursday.
The retailer affirmed the outlook it shared in March. It expects full-year revenue of between $43.8 billion and $45.2 billion, a decline from its most recent fiscal year, and a comparable sales drop of between 3% and 6%.
On a call with analysts, CEO Corie Barry said as shoppers face higher prices for housing, food and fuel, they are making trade-offs by buying some items and skipping others.
“We’ve been seeing a consumer who is — whether or not you call it a recession — exhibiting some recessionary behaviors,” she said.
But Barry said the Minnesota-based retailer expects the calendar year to be “the bottom for the decline in tech demand.” She said sales will bounce back because households now have far more connected devices than pre-pandemic. The debut of innovative products and the aging of items that customers have at home will spark replacements or new purchases, too, she said.
Here’s how the company did for the three-month period that ended April 29, compared with what Wall Street was expecting, based on a survey of analysts by Refinitiv:
- Earnings per share: $1.15 adjusted vs. $1.11 expected
- Revenue: $9.47 billion vs. $9.52 billion expected
Best Buy is the latest retailer to share an update on the American consumer. Over the past week, numerous retailers, including Walmart, Target and Home Depot, have spoken about more price-sensitive shoppers who aren’t as willing to spend on big-ticket or discretionary items — particularly compared with the stimulus check-fueled years of the Covid pandemic.
As a consumer electronics retailer, Best Buy is more vulnerable to that pullback since many of the items it sells come with a higher price tag and are not replaced frequently.
Best Buy’s net income for the first quarter fell to $244 million, or $1.11 per share, from $341 million, or $1.49 per share, a year earlier.
Net sales in the quarter declined to $9.47 billion, down 11% from $10.65 billion in the year-ago period, and fell short of Wall Street’s expectations.
Comparable sales declined 10.1% in the quarter, in line with the drop expected by investors, according to StreetAccount.
Sales trends were strongest in February and then weakened later in the quarter, Chief Financial Officer Matt Bilunas said on the analyst call. He said sales trends improved in the first three weeks of the second quarter relative to April.
Other retailers, including Target and Foot Locker, also spoke of weakening sales throughout the quarter, but did not note a recovery as the second quarter began.
As people buy fewer TVs, smartphones or home theater systems, Best Buy has looked for other ways to make money. Earlier this year, it struck a deal with Atrium Health, a North Carolina-based health-care system, to sell devices and handle installation for a program that allows patients to get hospital care at home. It recently relaunched its membership program, My Best Buy, which charges a subscription fee and includes features like tech support, extended returns and early access to hot products.
The retailer is also shaking up its workforce, as it manages costs and adapts to shopper preferences.
Online sales drove roughly a third of the company’s revenue in the U.S. in the first quarter, Barry said. That share has been steady over the past two years and it is twice as high as pre-pandemic, she said.
Stores still play a large role, even as more customers shop online. About 40% of those digital purchases got picked up at the store, even as nearly 60% of the company’s packages got delivered within two days.
The company laid off hundreds of store employees in April. The retailer declined to specify the number, but said it will add workers in growing areas such as its membership program and health business.
Over the past three years, Best Buy’s headcount has shrunk. As of the end of January, Best Buy had more than 90,000 employees in the U.S. and Canada. That’s down from the nearly 125,000 workers that it had in early 2020, according to company financial filings.
Most of that came from workers leaving their jobs and the company choosing not to backfill the roles, Barry said.
“We just knew the store volumes probably were never going to go back to where they were pre-pandemic,” she said. She added that Best Buy wanted to move more employees to roles where they interact with customers.
Shares of Best Buy closed Wednesday at $69.15, bringing the company’s market value to $15.12 billion. So far this year, its stock is down about 14%, trailing the 7% gains of the S&P 500 and the 2% declines of the retail-focused XRT during the same period.