Customers shop at a Best Buy store on August 24, 2021 in Chicago, Illinois.
Scott Olson | Getty Images
Best Buy on Wednesday lowered its forecast for its fiscal year and second quarter, 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% for the current three-month period, which ends Saturday. That’s less than Best Buy said in May, when it forecast comparable sales to be roughly in line with the 8% decline in the first quarter.
For the 12 months ending in late January, Best Buy said it expects same-store sales to decline about 11% from the 3% to 6% decline it forecast in May.
Best Buy said it would suspend stock buybacks, but would continue to pay its quarterly dividend. He also said in a press release that he “will continue to actively evaluate other stocks to manage profitability.” The company 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 self-conscious. budget as food and gas prices rose.
On Wednesday, Barry said the economic backdrop had become more difficult.
“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, Barry added that his sales were higher than before the pandemic, underscoring the company’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 launched 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 goods, citing rising food and gas prices. 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 steps to get rid of unwanted merchandise ahead of the crucial back-to-school and holiday seasons, including by canceling orders and offering deep discounts.
Shares of Best Buy initially fell more than 10% after the announcement, but shares only fell about 2% after investors digested the news. The company will release its second quarter results on August 30.
Read the company press release here.
