Customers shop at a Best Buy store on August 24, 2021 in Chicago, Illinois.
Scott Olson | Getty Images
Best Buy on Wednesday lowered its full-year and second-quarter forecasts, saying it had seen lower demand for consumer electronics amid inflation.
The consumer electronics retailer said it now expects same-store sales to decline about 13% in the second quarter. That’s less than it said in May, when it forecast it would be roughly in line with the first quarter, when it fell 8%.
For the fiscal year, Best Buy said it expects same-store sales to decline about 11%, compared with the 3% to 6% drop it forecast in May.
He said in a press release that “in response to the current business environment, the company will continue to actively evaluate other actions to manage profitability.” Best Buy did not immediately respond to a request for details on these potential steps.
With Wednesday’s announcement, Best Buy joins a growing list of retailers, including Gap, Adidas, Kohl’s, Target and Walmart, who have warned of falling sales or profits as consumers feel pinched by the inflation or shift their spending to services, such as travel and restaurants, rather than goods.
Still, Best Buy said its inventory levels at the end of the second quarter will be roughly flat compared to the year-ago period. That’s a notable difference from Walmart, Target and Gap, which have a glut of junk inventory weighing on profit margins.
Best Buy was already forecasting its sales to slow as it navigated a period when consumers had stimulus dollars and an unusual appetite for new laptops, home theater hardware and kitchen appliances during the pandemic. He had already lowered his forecast in May.
At that time, CEO Corie Barry said consumers were “retreating at a faster and deeper rate than we originally assumed” as they spent money on experiences or became more concerned about their budget as food and gas prices rose.
On Wednesday, Barry said the economic backdrop had become more challenging.
“As high inflation has continued and consumer confidence has deteriorated, customer demand within the consumer electronics industry has further weakened, leading to second-quarter financial results below expectations we shared in May,” she said in a press release.
Still, she added that her sales are higher than before the pandemic, underscoring the firm’s strong position even in turbulent times.
The company has been looking for new growth opportunities, such as adding merchandise such as exercise equipment, e-bikes and high-tech beauty gadgets, and launching Totaltech, a subscription program that includes benefits such as technical support and extended warranties.
Best Buy’s announcement comes after Walmart sent shockwaves through the retail sector on Monday when the big-box giant slashed its profit outlook. Walmart also said consumers were jumping on higher-margin discretionary products because they had to pay more for food and gas. The company, however, raised its sales outlook, saying shoppers have turned to its stores for low-cost groceries.
Target cut its profit margin forecast twice, first in May and then in June, saying it would take aggressive action to get rid of unwanted merchandise before the crucial back-to-school and holiday seasons, including by canceling orders and offering deep discounts.
Best Buy shares slid about 3% in after-hours trading.
This story is developing. Please check for updates.