Customers shop at Best Buy on August 24, 2021 in Chicago, Illinois.
Scott Olson | Getty Images
Best Buy on Wednesday cut its forecast for its fiscal year and second quarter, saying it saw weak consumer electronics demand amid inflation.
The consumer electronics retailer said it now expects same-store sales to fall about 13% for the current three-month period, which ends Saturday. That’s down from what Best Buy said in May, when it forecast comparable sales would be roughly in line with an 8% decline in the first quarter.
For the 12-month period ending in late January, Best Buy said it expects same-store sales to fall about 11%, compared to the 3% to 6% decline it forecast in May.
Best Buy said it will pause share buybacks, but will continue to pay its quarterly dividend. It also said in a press release that it will “continue to actively evaluate additional measures to manage profitability.” The company did not immediately respond to a request for details about those potential steps.
With Wednesday’s announcement, Best Buy joins a growing list of retailers including Gap, Adidas, Kohl’s, Target and Walmart who have warned of declining sales or profits as consumers feel stymied by inflation or shift spending to services, such as travel and dining out. , instead of merchandise.
However, Best Buy said its inventory levels at the end of the second quarter will be roughly flat compared to the same period last year. That’s a notable difference from Walmart, Target and Gap, which have an abundance of junk inventory impacting profit margins.
Best Buy already expected its sales to slow because it went through a period when consumers had stimulus dollars and an unusually large appetite for new laptops, home theater equipment and kitchen gadgets during the pandemic. It had already lowered its forecast in May.
At the time, CEO Corey Barry said consumers were “declining faster and deeper than we initially anticipated,” spending money on experiments or becoming more budget-conscious as food and gas prices soar.
On Wednesday, Barry said the economic background is becoming more challenging.
“With persistently high inflation and deteriorating consumer sentiment, consumer demand in the consumer electronics industry has declined further, resulting in second-quarter financial results that are below expectations we shared in May,” it said in a press release.
But it added that its sales are higher than they were before the pandemic, underlining the company’s strong position even in a turbulent time.
The company chased after new growth opportunities, such as adding merchandise like exercise equipment, electric bikes and high-tech beauty tools, and launching Totaltech, a subscription program that includes perks like tech support and extended warranties.
Best Buy’s announcement comes after Walmart sent shock waves through the retail industry on Monday, when the fund giant cut its earnings forecast. Walmart also said consumers are skipping higher-margin discretionary goods as they must pay more for food and gas. The company raised its sales forecast, however, saying that shoppers have turned to its stores for low-priced groceries.
Target lowered its profit margin forecast twice, first in May and then in June, saying it would take drastic steps to get rid of unwanted merchandise ahead of back-to-school seasons and crucial holidays — including canceling orders and offering deep discounts.
Best Buy shares initially fell more than 10% after the announcement, but shares only fell about 2% after investors digested the news. The company will announce its second-quarter earnings results on August 30.
Read the company’s press release here.
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