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Best Buy tempers its outlook for the rest of the year

The news: Best Buy beat Wall Street analysts’ expectations in Q2, but continues to face a challenging environment in which few consumers are splurging on big-ticket items such as home theaters, TVs, and appliances.

  • Adjusted earnings per share were $1.22, down 20.8% from $1.54, but ahead of the $1.06 that analysts expected, per Refinitiv.
  • Revenues were $9.58 billion, down $10.33 billion, but ahead of the $9.52 billion that analysts expected.

A challenging space: “We continue to expect that this year will be the low point in tech demand after two years of sales declines,” said CEO Corie Barry, in a statement.

  • That comment is in line with our forecasts. While we expect overall retail sales to grow 2.9% this year, we project computer and consumer electronics sales to rise just 1.1%.
  • In recognition of its near-term challenges, Best Buy narrowed its revenue guidance to $43.8 billion to $44.5 billion from $43.8 billion to $45.2 billion. It also adjusted its comparable sales guidance to a decline of 4.5% to 6.0% from its previous decline of 3.0% to 6.0%
  • It also continues to look for ways to drive growth. For example, its recently launched membership program, My Best Buy Total, helped it generate a slightly better gross profit rate in the quarter. That trend line drove it to slightly raise its expected adjusted earnings per share range to $6 to $6.40 up from its prior guidance of $5.70 to $6.50.

The bottom line: Given the slow-growth environment, Best Buy needs to protect its bottom line by executing well on fundamentals such as inventory management and upselling consumers on its membership programs.

  • However, over the long term it needs to find ways to improve the experience it delivers to shoppers to avoid losing sales to mass merchants like Amazon, Walmart, and Costco.

First Published on Aug 29, 2023