Best Buy lowers annual outlook
Q1 results show inflation’s impact
NEW YORK — Best Buy Co. posted first-quarter results that showed shoppers pulled back on spending, while higher costs ate into profits.
The nation’s largest consumer electronics chain also cut its annual outlook, noting a deteriorating macro economic environment.
Best Buy was among a handful of big winners in the pandemic, as shoppers splurged on tech equipment like laptops to create home offices to help them with remote work or cater to the needs of their children for virtual learning. But like many retailers, Best Buy is struggling with rising costs for everything from labor to shipping. The electronics chain also had to navigate global chip shortages. Another round of COVID-19 lockdowns in China is only worsening the problem. And soaring fuel costs and the return of promotions are hurting the bottom line.
Meanwhile, Best Buy, like other retailers, is also adjusting to changing shopping behavior. Demand for electronics is cooling as consumers go back to the office and resume normal lives. Inflation is also making shoppers scrutinize their purchases. In particular, CEO Corie Barry told reporters on a call Tuesday that purchases by lower-income shoppers, who were new Best Buy customers during the pandemic, have recently fallen off.
Barry said she expected this year’s results to be weaker than last year as it lapped stimulus payments and other government support and planned for higher costs in its supply chain. But she noted macro economic conditions worsened since it provided its financial outlook in early March, which resulted in its sales being slightly lower than its expectations.
“Sustained high levels of inflation is having an impact broadly again on the consumer, who we feel is pulling back at a faster, deeper pace than we initially assumed,” Barry said.
Overall, she said the company is preparing for an environment of softer sales, but not planning for a full recession.
Neil Saunders, managing director at Globaldata Retail, said given the multitude of challenges, Best Buy fared reasonably well.
Still, he’s worried about the consumer psyche.
“Electronics are highly discretionary, big-ticket items,” he said. “This puts them directly in the firing line of households looking to trim expenditure.”
Best Buy, based in Richfield, Minnesota, reported fiscal first-quarter net income of $341 million, or $1.49 per share. Earnings, adjusted for amortization costs and restructuring costs, came to $1.57 per share.
The results fell short of Wall Street expectations. The average estimate of 11 analysts surveyed by Zacks Investment Research was for earnings of $1.59 per share.
It posted revenue of $10.65 billion in the period, down 8.5 percent from the year-ago period. Nine analysts surveyed by Zacks expected $10.43 billion.
The company saw comparable sales decline across almost all categories, with the largest drivers being computing and home theater.
Domestic online revenue was down 4.9 percent on a comparable basis, and as a percentage of total domestic revenue, online revenue was 30.9 percent versus 33.2 percent last year.
Best Buy expects full-year earnings in the range of $8.40 to $9 per share, with revenue in the range of $48.3 billion to $49.9 billion. Previously, it expected per-share results of $8.85 to $9.15 and revenue of $49.3 billion to $50.8 billion
Shares slipped 69 cents to $71.90 in afternoon trading.