Best Buy cuts sales forecast as inflation pressures shoppers

Customers shop at a Best Buy store on August 24, 2021 in Chicago, Illinois.

Scott Olsen | fake images

Best Buy on Wednesday it cut its forecast for its fiscal year and second quarter, saying it has seen weaker demand for consumer electronics amid inflation.

The consumer electronics retailer said it now expects same-store sales to decline about 13% over the current three-month period, which ends Saturday. That’s lower than Best Buy said in May, when it predicted comparable sales would be roughly in line with the 8% drop in the first quarter.

For the 12-month period ending in late January, Best Buy expects same-store sales to decline about 11% compared with the 3% to 6% drop it forecast in May.

Best Buy said it will stop buying back shares but will continue to pay its quarterly dividend. It also said in a press release that it “will continue to actively evaluate further stocks to manage profitability.” The company did not immediately respond to a request for details about those possible steps.

With Wednesday’s announcement, Best Buy joins a growing list of retailers that includes Gap, Adidas, Kohl’s, Goal Y walmart they have warned of lower sales or profits as consumers feel pressured by inflation or shift spending to services, such as travel and dining, rather than goods.

However, Best Buy said its inventory levels at the end of the second quarter will be roughly flat compared to the same period a year ago. That’s a notable difference from Walmart, Target and the Gap, which have excess unwanted inventory weighing on profit margins.

Best Buy already anticipated that its sales would slow as it moved through a period when consumers had stimulus dollars and an unusually large appetite for new laptops, home theater equipment and kitchen appliances during the pandemic. I had He already lowered his forecast in May.

At the time, CEO Corie Barry said consumers were “regressing at a faster and deeper rate than we had initially assumed” as they spent money on experiences or became more budget-conscious as prices rose. of food and gasoline.

On Wednesday, Barry said the economic environment has become more challenging.

“As high inflation has continued and consumer confidence has deteriorated, customer demand within the consumer electronics industry has weakened further, leading to second quarter financial results below the expectations we shared in May,” he said in a press release.

However, Barry added that its sales are higher than before the pandemic, emphasizing the company’s strong position even in a turbulent time.

The company has pursued new growth opportunities, such as adding products like exercise equipment, electric bikes and high-tech beauty gadgets, and has launched Totaltech, a subscription program that includes benefits like tech support and extended warranties.

The Best Buy ad comes after walmart send shock waves in the retail industry on Monday, when the big box giant cut your earnings outlook. Walmart also said consumers are skipping higher-margin discretionary goods, citing rising food and gasoline prices. However, the company raised its sales outlook, saying shoppers have turned to its stores for cheap groceries.

Goal cut its profit margin forecast twice, first in May and then in junesaying it would take aggressive steps to get rid of unwanted merchandise ahead of crucial back-to-school and holiday seasons, including canceling orders and offering deep discounts.

Shares of Best Buy initially fell more than 10% after the announcement, but shares were only down about 2% after investors digested the news. The company will report its second-quarter earnings results on August 30.

read the company press release here.

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