Best Buy posts better-than-expected 3Q profits but sales sluggish amid spending malaise

Best Buy posts better-than-expected 3Q profits but sales sluggish amid spending malaise

Best Buy Co. posted stronger-than-expected profits, but reported a deeper-than-expected drop in revenue for the fiscal third quarter as shoppers continue to pull back on buying gadgets in an uncertain economy

ByANNE D'INNOCENZIO AP retail writer

November 21, 2023, 8:11 AM

FILE – Shoppers are silhouetted as they walk toward a Best Buy store after doors opened at 5 a.m., Nov. 26, 2021, in Lone Tree, Colo. Best Buy Co. posted stronger-than-expected profits, Tuesday, Nov. 21, 2023, but reported a drop in revenue for the fiscal third quarter as shoppers continue to pull back on buying gadgets in an uncertain economy. (AP Photo/David Zalubowski, file)The Associated Press

NEW YORK — Best Buy Co. posted stronger-than-expected profits for the fiscal third quarter but continues to struggle with sales declines as shoppers pulled back on a broad range of items from appliances to computers and phones in an uncertain economy.

The nation’s largest consumer electronics chain also cut its annual sales outlook.

Best Buy joins a string of other major retailers reporting earnings results this week and last that have shown a further softening in consumer spending as shoppers come more under more pressure from dwindling savings, higher interest rates and still stubborn inflation.

Kohl’s posted on Tuesday a bigger-than-expected decline in quarterly sales, as customers spent less at its department stores. Lowe's, the nation's second-largest home improvement chain behind Home Depot, also reported drops in both sales and profits. It cut its annual sales outlook as it reported a big customer pullback in do-it-yourself projects.

The job market has remained resilient, but Americans are facing higher prices on many necessities like food and rent, even as the inflation rate is easing overall. And they're also facing more expensive credit with the Federal Reserve hiking benchmark interest rates to combat inflation. It’s costing more to take out loans for appliances, cars and houses, or to use a credit card. As a result, consumers have become reluctant to spend unless there is a sale.

That scenario marks a big difference from Best Buy’s sales during the depths of the pandemic, which were fueled by oversized spending from shoppers who splurged on gadgets to help them work from home or help their children with virtual learning. Government stimulus checks fueled a lot of that spending as well.

Best Buy's shares were down 3%, while Lowe's shares were down nearly 2%. Kohl's shares were down more than 13% in morning trading.

“In the more recent macro environment, consumer demand has been even more uneven and difficult to predict,” said Best Buy's CEO Corie Barry in a statement.

Barry told reporters on a call Tuesday that promotions for the holidays are even better than pre-pandemic, and that it was pushing more opening price items, in particular TVs, for the holidays.

The Richfield, Minnesota-based company reported fiscal third-quarter net income of $263 million, or $1.21 per share, for the three-month period that ended Oct. 28. That compares with $277 million, or $1.22 per share, in the year-ago period. Earnings, adjusted for non-recurring costs and amortization costs, were $1.29 per share. The average estimate of 13 analysts surveyed by Zacks Investment Research was for earnings of $1.19 per share.

The consumer electronics retailer posted revenue of $9.76 billion in the period, falling short of Street forecasts. Eleven analysts surveyed by Zacks expected $9.88 billion. In the year-ago period, sales were $10.59 billion.

Comparable sales — business coming from its stores and its online channels — fell 6.9% in the quarter.

Best Buy expects full-year earnings in the range of $6 to $6.30 per share, with revenue in the range of $43.1 billion to $43.7 billion. That compares to prior revenue guidance of $43.8 billion to $44.5 billion.

Analysts are expecting $6.19 per share on revenue of $44.14 billion.

It also expects a comparable sales decline of 6% to 7.5% for the year, deeper than the previous guidance of a decline of 4.5% to 6%. _____ Elements of this story was generated by Automated Insights ( http://automatedinsights.com/ap ) using data from Zacks Investment Research.

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