As a result of decreased consumer electronics demand and inflation, Best Buy on Wednesday lowered its prediction for the fiscal year and second quarter.
The retailer for consumer electronics stated that for the upcoming three-month period, which ends on Saturday, it now anticipates same-store sales to fall by around 13%. That is less than what Best Buy stated in May, when it forecasted comparable sales would decrease by about the same amount as the first quarter’s 8 percent decline.
Best Buy predicts same-store sales to fall roughly 11% in the 12-month period ending in late January, compared to the 3% to 6% drop it predicted in May.
Best Buy announced that company will stop repurchasing shares but would keep on paying its quarterly dividend. Additionally, it added that it “will continue to actively assess further actions to manage profitability” in a news statement. An inquiry for more information regarding those prospective actions was not immediately answered by the firm.
With its announcement on Wednesday, Best Buy has now joined a growing list of retailers, such as Gap, Adidas, Kohl’s, Target, and Walmart, that have expressed concern about declining sales or profits as consumers become more price-conscious or shift their spending to services like travel and dining out rather than tangible goods.
However, Best Buy predicted that its inventory levels would be roughly unchanged from the same time last year at the conclusion of the second quarter. That stands out from Walmart, Target, and Gap, which all have excess inventory that is reducing their profit margins.
Best Buy had long planned for the fact that sales would decline as the pandemic’s stimulus monies and abnormally high demand for new computers, home entertainment systems, and kitchen appliances came to an end. May was already the month when it cut its forecast.
Corie Barry, CEO at the time, claimed that customers were “pulling back at a faster, deeper pace than we had initially assumed” whether they increased their spending on experiences or their attention to their spending as the cost of food and gasoline increased.
It is becoming more challenging economically, Barry said on Wednesday.
In a press release, she stated, “As high inflation has continued and consumer sentiment has deteriorated, customer demand within the consumer electronics industry has softened even further, leading to Q2 financial results below the expectations we shared in May.”
Barry however emphasised that despite the pandemic, sales are up, highlighting the company’s strong position throughout the tumultuous period.
The business has sought for fresh development prospects by expanding its product line to include items like gym equipment, electric bikes, and high-tech beauty accessories. It has also introduced Totaltech, a subscription service that offers benefits like tech assistance and extended warranties.
Best Buy made its announcement after Walmart, the big-box titan, slashed its profit outlook on Monday, shocking the entire retail sector. Walmart also claimed that shoppers are eschewing higher-margin discretionary items due to rising food and petrol prices. However, the company increased its sales projection, claiming that consumers were turning to its outlets for low-cost food.
Target cut its profit margin prediction twice, once in May and again in June. The retailer announced that it would take strong measures to get rid of unsold inventory before the important back-to-school and holiday seasons, including cancelling orders and slashing prices.
Following the announcement, Best Buy shares originally dropped by more than 10%, but when the news had time to sink in, shares were only down approximately 2%. On August 30, the corporation will release its second-quarter earnings reports.