Best Buy’s outlook on sales improves ahead of holidays

NEW YORK >> Best Buy’s profit and sales slipped in the third quarter on weakening demand for electronic gadgets, but it beat expectations and the retailer said a downturn in comparable stores sales this year will not be as bad as it had expected.

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

Retailers including Best Buy are facing a cloudy picture heading into the Black Friday weekend, considered the kickoff to the holiday shopping season.

The job market remains strong, consumer spending is resilient and inflation has been slowing. But what Americans are buying is changing. The soaring costs of using a credit card as the U.S. Federal Reserve hikes rates to cool the economy, on top of elevated prices for food, rent, gasoline and other household costs, has taken a toll. Consumers are reluctant to spend unless there is a sale, they’re being more selective with what they will buy and, in many cases, trading down to buy cheaper stuff.

“Across consumers, we can also see that savings are being drawn down and credit usage is going up,” Best Buy CEO Corie Barry said Tuesday. “And value clearly matters to everyone.”

Throughout 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 oversized spending by Americans who splurged on gadgets to help them work from home or help their children with virtual learning. Government stimulus checks fueled a lot of that spending.

The company acknowledged that 2022 would be a more difficult year from the start and soaring inflation has made it even tougher as Americans take more items deemed unessential 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 per-share earnings of $1.03 projected on Wall Street, according to a survey by Zacks Investment Research.

The company booked $26 million in restructuring costs as it cut jobs in response to slowed 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 edged out 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 had been expected.

Barry said during a Tuesday call with industry analysts that sales declined across most product categories. The weakness was largely driven by slowing sales of computers and home theaters as people ventured out more.