Q2 2023 results from Best Buy (BBY)

Televisions are on sale at a Best Buy store in New York.

andrew kelly | Reuters

best buy Sales fell about 13% in the fiscal second quarter on Tuesday as the retailer felt a pullback from inflation-weary shoppers.

The company confirmed its guidance for the full year. The company had lowered its forecast at the end of July, saying he expects demand for consumer electronics to decline as people pay more for groceries and gas. He expects same-store sales to fall about 11% for the 12 months to January.

CEO Corie Barry acknowledged that the economic backdrop had become more turbulent.

“We are clearly operating in an uneven sales environment,” she said in a press release. The company is “focused on balancing our short-term response to difficult conditions with stewardship of what is within our control” as it works toward long-term growth, Barry added.

Here’s how the retailer fared in the three months ended July 30 compared to what Wall Street expected, according to a Refinitiv analyst survey:

  • 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 sea change in consumer spending habits. A year ago, the retailer saw sales increase by nearly 20% as shoppers bought TVs, laptops and more to maintain pandemic-fueled 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 big-ticket and discretionary items because 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 in stores open at least 14 months, a key metric known as same-store sales, were down 12.1% from the year-ago period. That’s slightly better than Best Buy’s forecast, which predicted a decline of about 13% for the current three-month period.

Best Buy expects a steeper decline in same-store sales in the third quarter, Chief Financial Officer Matt Bilunas said in the company’s statement Tuesday. He gave no specific guidance, but said it would be more than the 12.1% drop reported for the second quarter.

Barry said the retailer has noticed some shoppers trying to stretch the budget. Some, especially those in lower-income households, are turning to cheaper TVs or calendar purchases for sales events, she told investors on winning calls.

Still, she says, customers are willing to pay more for certain branded items, such as smartphones and gaming hardware.

Industry retailers face an abundance of junk merchandise. walmart and Targetfor example, reduce their full-year profit forecasts because they mark items down to try to get them off the shelves.

Barry said Best Buy has closely managed its merchandise to ensure it doesn’t get stuck with excess merchandise. At the end of the second quarter, she said, inventories were down 6% from the year-ago period. It increased by around 16% compared to the same period in 2019.

Even with lower inventory levels, however, Barry said the company’s profits are under pressure as competitors offer discounts on an abundance of products with more promotions.

As sales slow, Best Buy has suspended stock buybacks. It is also in the midst of a restructuring initiative, which included layoffs store employees.

Best Buy said it spent $34 million on the restructuring effort, most of it on severance pay, and it expects more in the coming months. He did not say whether that will include more layoffs.

As of Monday’s close, shares of Best Buy 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. Please check for updates.

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