best buy Tuesday beat Wall Street’s quarterly earnings expectations as inflation-shrinking demand for expensive consumer electronics came in better than expected.
The consumer electronics retailer, which had lowered its forecast this summer, reiterated its outlook for the holiday quarter. It raised its full-year guidance to reflect the pace, saying it expects comparable sales to fall about 10%.
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Shares of the company rose more than 9% in premarket trading on Tuesday.
Here’s how the retailer did for the three months ended October 29 compared to what Wall Street was anticipating, according to a survey of Refinitiv analysts:
- Earnings per share: $1.38 adjusted vs $1.03 forecast
- Revenue: $10.59 billion vs $10.31 billion expected
While Best Buy’s quarterly results were better than expected, demand is down from pandemic highs, when consumers turned to its stores for home theaters, computer monitors, cooking and more while working, playing and cooking at home.
Net sales for the third fiscal quarter were down about 11% from $11.91 billion year-over-year in the third quarter. Net income fell to $277 million, or $1.22 per share, from $499 million, or $2 per share, a year earlier.
On a call with investors, CEO Corie Barry said sales were down across most of Best Buy’s product categories – with the biggest drop in computers and home theaters. However, it said, compared to the same quarter in 2019, its IT revenue is 23% higher and its device revenue remains 37% higher.
She said the retailer “saw relatively consistent behavior from our shopping customers” during the quarter, even as consumers faced high prices at the grocery store and at the gas station. But she added that buyers are very interested in sales events.
“Among consumers, we can also see savings going down and credit use going up,” she said. “And value clearly matters to everyone.”
Best Buy is seeing a more uncertain retail environment this holiday season. Some inflation-hit consumers are opting out of discretionary items and spending more money on necessities and experiences. The company joined other retailers in trimming its outlook this summer. He said at the time that he expected comparable store sales to fall about 11% for the 12 months to January.
A month after Best Buy warned of slowing sales, it cut jobs across the country.
Yet, so far, the company has exceeded its own expectations.
Comparable sales fell 10.4%, less than the 12.9% expected by analysts, according to FactSet. The key metric, also known as comparable store sales, tracks sales online and in stores open at least 14 months.
It was also a smaller drop than the retailer had anticipated. Best Buy had not given specific guidance for comparable sales in the third quarter, but its chief financial officer, Matt Bilunas, had warned that it would fall more than 12.1% in the second quarter.
The company said it had resumed share buybacks, which it halted when it withdrew its guidance in July. Best Buy said it plans to spend about $1 billion on stock buybacks this year.
CEO Barry said the company was tightly controlling its inventory, which was down 14.7% year over year. The retailer anticipated a drop in demand and missed a period a year ago when shipments arrived both early and late due to supply chain issues.
Inventory has been a closely watched metric in the retail industry as many businesses face an overabundance of unwanted merchandise and have had to mark items, cancel orders, or pack and store merchandise.
Barry said holiday shopping habits are also shifting towards a more typical pre-pandemic pattern. In a press release, she said the retailer expects customers to spend more during Black Friday, Cyber Monday and the two weeks leading up to Christmas.
Best Buy shares are down about 30% so far this year, underperforming the S&P 500 index. Shares closed Monday at $70.83, down nearly 2%. The company’s market value is $15.95 billion.