People walk into a Best Buy store in a Brooklyn mall on August 29, 2023 in New York City.
Spencer Platt | Getty Images
on Tuesday cut its full-year sales forecast and missed Wall Street’s quarterly revenue expectations, as early holiday shopping and a fresh batch of iPhones and AI-enabled laptops weren’t enough to drive higher sales.
The consumer electronics retailer said it now expects full-year revenue to range from $41.1 billion to $41.5 billion, compared with prior guidance of $41.3 billion to $41.9 billion. It expects full-year comparable sales to decline by between 2.5% and 3.5%, compared with its prior expectations of a 1.5% to 3% drop. Comparable sales includes sales online and at stores open for at least 14 months.
Shares of Best Buy closed on Tuesday at $88.48, down nearly 5%.
On an earnings call, CEO Corie Barry said the retailer saw “softer than expected sales,” particularly in September and October.
“We attribute this to a combination of overall ongoing macro uncertainty, customers waiting for deals and sales and distraction during the run-up to the election, particularly in nonessential categories, [and] expected lower demand between sales events,” she said. “But the impact was even steeper than we estimated.”
Barry added that in recent weeks demand has picked up again as holiday sales gain momentum and election concerns ease. Still, for the holiday quarter, Best Buy has muted expectations.
The company expects comparable sales to range from flat to a decline of 3% in its fiscal fourth quarter.
On a call with reporters, Barry said Best Buy is contending with a few challenging dynamics, including a holiday season that’s five days shorter. She said shoppers are responding to big deals and sales events. Yet she said it expects the peak in sales during times like Black Friday and Cyber Monday to be higher, but the valleys before and after those to be lower.
Here’s what the retailer reported for its fiscal third quarter, compared with what Wall Street expected, according to a survey of analysts by LSEG:
- Earnings per share: $1.26 adjusted vs. $1.29 expected
- Revenue: $9.45 billion vs. $9.63 billion expected
In the three-month period that ended Nov. 2, Best Buy’s net income rose to $273 million, or $1.26 per share, from $263 million, or $1.21 per share, a year earlier.
Net sales fell to $9.45 billion from $9.76 billion in the year-ago quarter.
Best Buy is waiting for a wave of shoppers to replace old devices and upgrade to new, higher-tech ones after an approximately two-year sales slump in the consumer electronics category. A mix of factors have dragged down the retailer’s sales, including the spike in purchases of items like laptops, home theater systems and kitchen appliances during the Covid pandemic; the pullback in discretionary purchases as Americans spent more on food and other necessities due to inflation; and the shift back to spending on services, including travel and dining out.
Over the past few quarters, CEO Barry and CFO Matt Bilunas have said they anticipate this year to be one that brings “increasing industry stabilization.” Barry has also spoken about Best Buy’s anticipation that new gadgets, including Apple’s fresh collection of iPads as well as artificial intelligence-enabled laptops from Microsoft, will drive sales.
Yet the debut of those devices wasn’t enough to meaningfully lift Best Buy’s quarter. Comparable sales declined by 2.9% across the business and by 2.8% in the U.S.
Best Buy said weakness in sales of appliances, home theaters and gaming contributed to the comparable sales decline, but was offset in part by growth of computing, tablets and sales in the services category. The company offers services, such as installing tech in customers’ homes.
Digital sales were also soft, decreasing 1% year over year in the U.S.
Barry said on the earnings call that Best Buy is “seeing curiosity” about AI-enabled phones, but she said “a lot of that innovation is still in front of us.” She said mobile phone trends were down year over year, but improved slightly compared with the second quarter.
“We’re just at the early stage — and I would say this broadly about AI in general,” she said.
Tariffs could put Best Buy’s sales at risk, too, if they result in higher costs for the company and for customers. President-elect Donald Trump said on Monday in a Truth Social post that he would raise tariffs by an additional 10% on all Chinese goods and impose tariffs of 25% on imports from Mexico and Canada. On the campaign trail, he proposed tariffs that were even higher.
Barry said China accounts for the highest import volumes for merchandise sold by Best Buy, followed by Mexico. She said the higher costs from tariffs would be shared by the company, vendors and customers.
“These are goods that people need, and higher prices are not helpful,” she said.
