Best Buy reports another quarterly sales decline on cautious shopping

NEW YORK (AP) — Best Buy, the nation’s largest consumer electronics chain, reported another quarterly sales decline Thursday as Americans cut back on purchases of electronic devices and gadgets to focus on essentials.

But the latest period showed that Best Buy’s business is stabilizing, with results exceeding Wall Street expectations. The Richfield, Minn.-based retailer lowered its sales forecast but raised its profit forecast for the current fiscal year.

Best Buy shares rose more than 17% on Thursday.

“Overall, shoppers remained focused on deals and drawn to the more predictable sales moments of July 4, Black Friday in July and the beginning of back-to-school sales,” Best Buy CEO Corie Barry told analysts on the call. She noted that comparable sales — those from digital channels and physical stores — in July were the best of the quarter.

The company recorded an increase in sales of tablets, computers and services, which more than compensated for declines in the household appliances, home cinema and gaming segments.

Barry noted that major appliances and televisions were still heavily discounted, a trend that would likely continue into the holiday season. However, she said Best Buy remained focused and deliberate about where and when the retailer cut prices, balancing profitability and sales.

Consumers are struggling with high prices and higher interest rates. The government said earlier this month that hiring was much weaker than expected in July, and the unemployment rate rose for the fourth month in a row. But since then, economic reports have shown that the number of layoffs is still low and activity and employment in the services sector remain stable.

Shoppers are paying more attention to experiences like travel and concert tickets, which has also led to a reduction in gadget spending.

For Best Buy, the latest trends are a reversal from the height of the pandemic, when sales were fueled by massive spending as people spent money on electronics to help them work from home or better prepare their children for virtual learning. Government stimulus checks also fueled spending.

To boost sales, Best Buy is modernizing its stores to attract customers and focusing on paid membership services. The company is also reducing the number of layers of management and reinvesting in more employees in its stores to help customers.

Best Buy just hired dedicated, trained experts in the computer departments of hundreds of its stores and plans to do the same in its home theater and major appliance departments. The company said more than 60% of its employees are certified in at least two categories.

It’s also betting on new gadgets, like AI-enhanced personal computers from companies like Microsoft. While expensive, they’re more efficient and offer longer battery life. And these new devices will drive down prices on older models.

Earlier this month, Best Buy announced a new live tracking feature that uses artificial intelligence to allow customers to digitally track deliveries and installations for purchases of large items like big-screen TVs, refrigerators, washers, and dryers.

Best Buy reported revenue of $291 million, or $1.34 per share, for the three months ended Aug. 3. That compares with revenue of $274 million, or $1.25 per share, in the same period a year earlier.

Sales fell 3% to $9.29 billion from $9.58 billion in the quarter.

Analysts were expecting earnings of $1.16 per share on sales of $9.23 billion, according to FactSet.

Like-for-like sales — those from online channels and brick-and-mortar stores — fell 2.3%. That was a smaller decline compared to the 6.1% recorded in the previous quarter.

Best Buy lowered its fiscal year sales forecast from the prior quarter. It now expects revenue to be between $41.3 billion and $41.9 billion, down from its prior forecast of $41.3 billion and $42.6 billion. It forecast comparable sales to decline 1.5% to 3%. In May, it had expected a range of unchanged to a decline of 3%.

The company raised its earnings forecast for the year to a range of $6.10 to $6.35 per share. That compared with its previous forecast of $5.75 to $6.20 per share.

Analysts were expecting earnings of $6.07 per share on sales of $41.75 billion this year, according to FactSet.