Customers shop at a Best Buy store on August 24, 2021 in Chicago, Illinois.
Scott Olson | Getty Images
Best Buy on Wednesday 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% in the current three-month period, which ends Saturday. That’s less than Best Buy said in May, when it predicted comparable sales would be roughly in line with the 8% decline in the first quarter.
For the 12-month period ending at the end of January, Best Buy said it expects same-store sales to decline about 11%, compared with a decline of between 3% and 6% that he predicted in May.
Best Buy said it will pause share buybacks but will continue to pay its quarterly dividend. It also said in a press release that it will “continue to actively evaluate further actions to manage profitability.” The company did not immediately respond to a request for details on those possible steps.
With Wednesday’s announcement, Best Buy joins a growing list of retailers, including Gap, Adidas, Kohl’s, Target and Walmart, that have warned of lower sales or profits as consumers feel hit by the inflation or shift spending toward services, such as travel and dining, sooner. than the 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 excess unwanted inventory weighing on profit margins.
Best Buy already expected its sales to slow as a period passed when consumers had stimulus dollars and unusually large appetites for new laptops, home theater equipment and kitchen appliances during the pandemic. He had already lowered his forecast in May.
At the time, CEO Corie Barry said consumers “were withdrawing at a faster and deeper rate than we had originally assumed,” as they spent money on experiences or became more budget-conscious as prices rose. of food and gas.
On Wednesday, Barry said the economic environment has become more difficult.
“As high inflation has continued and consumer sentiment has deteriorated, demand from customers in the consumer electronics industry has softened further, leading to below-par second-quarter financial results of the expectations we shared in May,” he said in a press release.
However, he 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, including adding merchandise such as exercise equipment, e-bikes and high-tech beauty gadgets, and launching 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 industry on Monday, when the big-box behemoth cut its profit outlook. Walmart also said consumers are skipping higher-margin discretionary products because they have to pay more for food and gas. However, the company raised its sales outlook, saying shoppers have flocked to its stores for low-priced 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 canceling orders and offering deep discounts.
Shares of Best Buy initially fell more than 10% after the announcement, but the stock was only down 2% after investors digested the news. The company will report its second quarter results on August 30.
Read the company’s news release here.