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 12 months and second quarter, saying it has seen weaker demand for consumer electronics amid inflation.
The buyer electronics retailer said it now expects same-store sales to say no about 13% for the present three-month period, which ends Saturday. That is lower than what Best Buy said in May, when it predicted comparable sales could be roughly in step with the 8% decline in the primary quarter.
For the 12-month period that ends in late January, Best Buy said it expects same-store sales to say no around 11%, compared with the drop of between 3% and 6% that it forecast in May.
Best Buy said it should pause share buybacks, but will proceed to pay its quarterly dividend. It also said in a news release that it “will proceed to actively assess further actions to administer profitability.” The corporate didn’t immediately reply to a request for details about those potential steps.
With Wednesday’s announcement, Best Buy joins a growing list of shops including Gap, Adidas, Kohl’s, Goal and Walmart which have warned of lower sales or profits as consumers feel pinched by inflation or shift spending to services, comparable to travel and dining out, reasonably than goods.
Yet Best Buy said its inventory levels at the tip of the second quarter shall be roughly flat compared with the year-ago period. That is a notable difference from Walmart, Goal and Gap, which have a glut of unwanted inventory weighing on profit margins.
Best Buy already anticipated its sales would slow because it lapped a period when consumers had stimulus dollars and unusually big appetites for brand new laptops, home theater equipment and kitchen appliances through the pandemic. It had already lowered its forecast in May.
At the moment, CEO Corie Barry said consumers were “pulling back at a faster, deeper pace than we had initially assumed,” as they spent money on experiences or became more budget-conscious as food and gas prices rose.
On Wednesday, Barry said the economic backdrop has turn into more difficult.
“As high inflation has continued and consumer sentiment has deteriorated, customer demand inside the consumer electronics industry has softened even further, resulting in Q2 financial results below the expectations we shared in May,” she said in a news release.
Yet she added that its sales are higher than before the pandemic, emphasizing the corporate’s strong position even in a turbulent time.
The corporate has chased recent growth opportunities, comparable to adding merchandise like exercise equipment, electric bikes and high-tech beauty gadgets, and launching Totaltech, a subscription program that features perks like tech support and prolonged warrantees.
Best Buy’s announcement comes after Walmart sent shockwaves across the retail industry on Monday, when the massive box behemoth cut its profit outlook. Walmart also said consumers are skipping over higher-margin discretionary goods as they need to pay more for food and gas. The corporate raised its sales outlook, nevertheless, saying shoppers have turned to its stores for low-priced groceries.
Goal slashed its profit margin forecast twice, first in May after which in June, saying it might take aggressive steps to eliminate unwanted merchandise ahead of the crucial back-to-school and holiday seasons — including cancelling orders and offering deep discounts.
Best Buy shares initially fell greater than 10% following the announcement, but shares were only down about 2% after investors digested the news. The corporate will report its second-quarter earnings results on Aug. 30.
Read the corporate’s news release here.