Best Buy’s outlook on sales improves ahead of the holidays

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NEW YORK – Best Buy’s profit and sales fell in the third quarter as demand for electronics weakened, but it beat expectations and the retailer said a decline in comparable store sales this year won’t be as bad as it expected.

Shares jumped more than 8% at the opening bell on Tuesday.

Retailers including Best Buy face a murky picture heading into Black Friday weekend, considered the start of the holiday shopping season.

The labor market remains strong, consumer spending is resilient and inflation has slowed. But what Americans buy is changing. The rising costs of using a credit card as the US Federal Reserve raises rates to cool the economy, in addition to increased prices for food, rent, gas and other household costs, have taken their toll. Consumers are reluctant to spend unless there is a sale, they are more selective about what they buy and, in many cases, trade down to buy cheaper items.

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“Across consumers, we can also see savings going down and credit utilization going up,” Best Buy CEO Corie Barry said. “And value clearly matters to everyone.”

During the third quarter, customers at Best Buy were looking for discounts, Barry said.

Best Buy’s sales during the depths of the pandemic were fueled by outsized spending by Americans who splurged on devices to help them work from home or help their children with virtual learning. Government stimulus checks fueled much of that spending.

The company acknowledged that 2022 would be a tougher year from the get-go and rising inflation has made it even tougher as Americans cross more items deemed non-essential off their shopping lists.

The Minneapolis consumer electronics chain earned $277 million, or $1.22 per share in the quarter that ended Oct. 29, or $1.38 per share adjusted for restructuring and amortization costs. That easily beat the $1.03 per share earnings projected on Wall Street, according to a survey by Zacks Investment Research.

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The company booked $26 million in restructuring charges as it cut jobs in response to slow spending by Americans.

It was a significant drop from last year’s profit of $499 million during the same period.

Sales fell 11% to $10.56 billion, though that beat analyst expectations for $10.31 billion.

Comparable sales – those coming from Best Buy’s stores and online – fell 10.4%, which was not as bad as expected.

Barry said on a Tuesday call with industry analysts that sales were down across most product categories. The weakness was largely driven by slowing sales of PCs and home appliances as people took more risks.

But Barry and other retail executives also expect shoppers to return to a more typical holiday pattern, compared to the stresses of the pandemic. Best Buy anticipates more active shoppers around Black Friday week and Cyber ​​Monday, and the two weeks before Christmas.

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Retailers have spread those sales out over longer periods recently, first for safety reasons, then because global supply chains that had been dormant during the pandemic sprang to life faster than anyone expected and there were massive backlogs of goods at U.S. ports.

Best Buy said comparable-store sales for the year won’t be as bad as it anticipated. Best Buy now expects a 10% decline in same-store sales for the year, slightly better than previous forecasts.

Neil Saunders, managing director of GlobalData Retail, said that double-digit percentage declines in both profits and sales would normally be cause for alarm, but in this case, it was expected. Saunders, however, says weak gadget sales don’t bode well for Black Friday.

“We don’t expect demand to collapse, but we do expect it to be much softer than usual,” Saunders said.

Follow Anne D’Innocenzio: http://twitter.com/ADInnocenzio



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