Best Buy stocks sinks as early holiday deals pull sales forward
Investor reaction to retailer’s results highlight volatility of COVID era
Best Buy Co. 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 Inc. moving its Prime Day into October, which lifts gadget sales across the industry, boosted Best Buy’s same-store sales by 23 per cent in the fiscal third quarter that ended on Nov. 2. That topped estimates for a 14 per cent 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 is as good as it’s going to get for the chain.
In the fourth quarter, inventory shortages in categories like large appliances and new gaming 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.”
The shares fell as much as 7.2 per cent on Tuesday. Through Monday, the shares had soared 39 per cent this year.
Like in the two previous two quarters, the U.S. electronics retailer said it won’t provide guidance ahead of the holiday season. Its only forecast of sort is that sales will gain, but at a slower rate.
“The demand for the products and services we 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. Apple Inc. introduced its latest iPhone model later than usual this year.
Best Buy CEO Corie Barry laid out a robust plan for the holiday season that leverages the company’s physical stores to expedite online sales. This includes more orders being shipped from locations 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 (U.S.) topped expectations of $1.72, the average of estimates compiled by Bloomberg. A big lift to revenue was e-commerce, which surged 173 per cent. That came after online revenue more than tripled in the previous period.