Best Buy shares slow over cautious outlook

Best Buy shares fell after the U.S. electronics retailer warned that demand could slow during the critical holiday season after Americans started shopping early amid the pandemic.

The quicker start to gift buying and Amazon.com moving its PrimeDay intoOctober, which lifts gadget sales across the industry, boosted Best Buy’s same-store sales by 23 percent in the fiscal third quarter that ended on Nov. 2. That topped estimates for a 14 percent gain. That level of growth continued this month but won’t sustain the same rate going forward, the company said.

Best Buy’s results and investors’ reaction to them highlight the volatility of the COVID-19 era. The company blew past all expectations, but the case can be made this isas goodas it’s goingtoget for the chain. In the fourth quarter, inventory shortages in categories like large appliances and newgaming consoles from Microsoft and Sony could hinder growth. And heading into next year as consumers get vaccinated and shift spending to areas like travel, demand for technology could wane.

“It’s likely that some of that continues on as we go into the beginning of next year,” Best Buy Chief Financial Officer Matt Bilunas said on a call with analysts. After that, it “may start to subside a bit.”

Through Monday, the shares had soared 39 percent this year.

Like in the two previous two quarters, the U.S. electronics retailer said it won’t provide guidance ahead of the crucial holiday season. Its forecast of sorts is that saleswill gain, but at a slower rate.

“The demand for the products and serviceswe sell remains at elevated levels, but similar to last quarter, it continues to be difficult for us to predict how sustainable these trends will be,” Bilunas said. “There continue to be other factors to consider such as potential future government stimulus actions.”

Another factor weighing on growth last quarter was offset by a decline in mobile phone sales.

Best Buy Chief Executive Officer Corie Barry laid out a robust plan for the holiday season that leverages the company’s physical stores to expedite online sales. This includesmore orders being shipped fromlocations and using store employees to provide online customer service.

Best Buy said it’s testing new store formats, including one that turns a portion of retail selling space into an area for fulfilling online orders.

Earnings per share of $2.06 topped expectations of $1.72, the average of estimates compiled by Bloomberg. A big lift to revenue was e-commerce, which surged 173percent. That cameafter online revenue more than tripled in the previous period.

But more e-commerce often weighs on profitability because of the cost of shipping and returns. Last quarter, the company’s gross margin was 23.6 percent, down from a year ago.