Best Buy stock falls as it posts broad third-quarter sales decline

Consumers are turning away from discretionary goods, lowering the power of Best Buy’s (BBY) third-quarter results.

Shares of the electronics retailer fell more than 4% Tuesday morning, after the company reported mixed results with net sales below expectations.

Consumers are under pressure from headwinds such as rising interest rates, student loan repayments, credit card debt and declining savings.

Net sales came in at $9.76 billion, less than the $9.90 billion expected. Sales of appliances, consumer electronics, computing and mobile phones all fell, but the company saw some strength in its entertainment products.

International sales saw a decline of 1.90%, stronger than expected.

In the release, Best Buy CEO Corrie Barry said: “These results demonstrate our continued strong operational execution as we navigate the near-term sales pressure our industry has experienced for several quarters. »

She added: “In the more recent macroeconomic environment, consumer demand has been even more uneven and difficult to predict. ” On a call with investors, she also hinted at a pullback after the surge in electronics sales during the pandemic, and pressure from “the return to services outside the home, such as travel and entertainment, and inflation.”

The distribution of winnings:

Here’s what Best Buy reported, compared to Bloomberg consensus data:

Adjusted EPS: $1.29 versus $1.18 expected

Net sales: $9.76 billion versus $9.90 expected

Total sales in the United States: -7.30% versus -5.98% expected

• Appliances: -15.30% versus -8.20% expected

• Entertainment: 20.60% versus 5.67% expected

• Consumer electronics: -9.50% versus -6.00% expected

• Computers and mobile telephony: -8.30 versus -6.40% expected

International: -1.90% versus -4.19% expected

Inventories for the third quarter were 4% higher year over year, but Chief Financial Officer Matthew Bilunas said nearly $600 million in inventory receipts arrived days later than expected for the year last, moving their numbers from the third to the fourth quarter. Therefore, inventory figures are down 4%, excluding this factor.

The story continues

The company is also rethinking its real estate portfolio. It closed 24 stores last year and nearly 100 locations, or about 10 percent, in the past five years.

In the short term, Best Buy plans to close approximately 15 to 20 stores per year in an effort to refresh its stores and “right-size” its traditional gaming spaces, as PC gaming continues to see growth. This also makes room for other new products such as Oura rings, spotlights, electric bicycles and scooters, as well as Lovesac furniture products.

The company is looking to experiment with store formats. “We plan to open a few smaller stores in overseas markets to test the impact of adding new locations and geographies where we have no prior physical presence and where our omnichannel sales penetration is low,” he said. Barry said during the call.

Looking ahead, Best Buy lowered its guidance for fiscal 2024, for the 12 months ending January 2024. Revenue for the year is now expected to be between $43.1 billion and $43.7 billion, down from previous forecasts of $43.8 billion to $44.5 billion.

Sales are expected to decline 6.0% to 7.5%, compared to a previously expected decline of 4.5% to 6.0%.

But the retailer could see the bottom.

“After two years of decline, we believe the consumer electronics industry should experience greater stabilization next year and possibly growth in the second half…we believe it is poised to experience growth in the coming years, benefiting from a significantly larger installed base and the constant desire and need to replace technology as it ages,” Barry said.

The company is optimistic heading into the holidays and has seen better year-over-year sales in the first few weeks so far, according to Barry.

“(Best Buy is) prepared for a very bargain-oriented customer, with promotions and offers for all budgets, new shopping experiences, an expanded product assortment and fast and free fulfillment,” a- she declared in the press release.

Factors that the company believes could lead to higher sales compared to last year include improving sales of home theaters and televisions, continuing a trend of strong performance in entertainment products. In the computing category, laptops are expected to see renewed interest, while gaming continues to be strong.

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Brooke DiPalma is a senior reporter for Yahoo Finance. Follow her on Twitter at @BrookeDiPalma or email him at bdipalma@yahoofinance.com.

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