The televisions are seen for sale at a Best Buy store in New York City.
Andrew Kelly | Reuters
Best Buy said Tuesday that sales fell about 13% in the fiscal second quarter as the retailer felt a pushback from inflationweary shoppers.
The company reaffirmed its fullyear guidance. The company had cut its forecast in late July, saying it expected weaker demand for consumer electronics as people pay more for groceries and gas. Samestore sales are expected to fall about 11% in the 12month period ending in January.
CEO Corie Barry acknowledged that the economic environment has become more turbulent.
“We are clearly operating in an uneven sales environment,” he said in a press release. The company is “focused on balancing our shortterm response to challenging conditions and managing well what is in our control” while working toward longterm growth, Barry added.
Here’s how the retailer did in the threemonth period ended July 30 compared with what Wall Street was anticipating, according to a survey of analysts by Refinitiv:
- Earnings per share: $1.54 adjusted vs. $1.27 expected
- Revenue: $10.33 billion vs. $10.24 billion expected
Softer sales, more promotions
Best Buy’s quarter reflects a sharp shift in consumer spending habits. A year ago, the retailer saw sales jump nearly 20% as shoppers bought TVs, laptops and more to keep up with pandemicfueled habits like working from home and streaming movies.
Now, however, some of those patterns have faded as people return to the office or go on summer vacation. Some consumers are skipping bulk and discretionary items as they pay more for necessities.
Best Buy’s quarterly net income fell to $306 million, or $1.35 per share, from $734 million, or $2.90 per share, a year earlier. Excluding items, it earned $1.57 per share.
Sales online and at stores open at least 14 months, a key metric known as samestore sales, were down 12.1% from the yearago period. That’s slightly better than Best Buy’s guidance, which predicted a decline of about 13% for the current threemonth period.
Best Buy expects a sharper decline in samestore sales in the third quarter, Chief Financial Officer Matt Bilunas said in the company’s statement on Tuesday. He did not give specific guidance, but said it will be more than the 12.1% drop reported for the second quarter.
Barry said the retailer has noticed some shoppers are trying to stretch the budget. Some, especially those in lowerincome households, are cutting back on lowerpriced TVs or temporary purchases for sales events, he told investors on earnings calls.
Still, he said, customers are willing to pay more for some namebrand items, such as smartphones and gaming hardware.
Retailers across the industry are dealing with a flood of unwanted merchandise. Walmart and Target, for example, cut their fullyear profit forecast because they are marking down items to try to get them off the shelves.
Barry said Best Buy has closely managed its merchandise to make sure it doesn’t get stuck with excess products. At the end of the second quarter, he said, inventories were down 6% compared to the yearago period. It was up about 16% from the same time in 2019.
However, even with lower inventory levels, Barry said the company’s profits are under pressure as competitors discount a lot of products with more promotions.
As sales softened, Best Buy has paused stock buybacks. It is also in the midst of a restructuring initiative, which has included layoffs of store employees.
Best Buy said it has spent $34 million on the restructuring effort, most of which was spent on termination benefits, and that it expects more in the coming months. He did not say whether that will include more layoffs.
As of Monday’s close, Best Buy shares are down about 27% so far this year. Shares closed Monday at $73.70, down less than 1%. The company’s market value is around $16.6 billion.
Read the company’s earnings release here.
This story is developing. Check back for updates.