Best Buy Co.
’s profit and sales dropped in the latest quarter, as spending on computers and other home electronics dried up compared with earlier in the pandemic, and discounts across the industry ate into profits.
Comparable sales, those from stores and digital channels operating for at least 12 months, fell 12.1% in the quarter ended July 30 compared with the same period last year. Sales declined in almost all product categories, with the biggest drops in computing and home theater, the company said.
Best Buy faces a glut of discounted inventory from competitors, though its own inventory levels are healthy, Chief Executive
said on a conference call Tuesday. Spending on consumer electronics is likely to normalize later in the year, she said, “but I hedge that just because there is so much inventory that’s in the marketplace right now,” and the consumer environment is uneven.
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Best Buy executives said they expect a holiday season filled with discounts that starts a bit later than earlier in the pandemic when shoppers rushed to buy gifts early amid supply-chain snarls. “I think this holiday pattern will be a little bit more like pre-pandemic,” Ms. Barry said.
Best Buy is working to lower costs through job cuts, reduced corporate travel and voluntary retirements to prioritize investments in new business lines such as healthcare and store remodels, executives said Tuesday.
The retailer, which was one of several major chains to warn over the summer of a pullback by consumers, said Tuesday that comparable sales and operating profits would drop at similar rates in the fall quarter.
It follows a string of results by companies from
that have seen demand drop for some goods as consumers contend with higher prices for food and fuel and stop buying pandemic favorites such as electronics and patio furniture.
Last month, Best Buy cut its sales and profit forecast for the second quarter, and the company has moved to cut jobs. Its final results were slightly better than those lowered expectations.
Best Buy’s stock rose more than 3% to $76.38 in Tuesday trading. The shares had declined about 25% so far this year.
For the full fiscal year, the company reiterated that it expects comparable sales to decline about 11%. That would mark a sharp reversal from the prior two fiscal years when such sales increased by about 10% in each period.
Best Buy and other retailers face a challenging environment ahead of the important holiday shopping season. Consumers are spending, but as prices rise many are prioritizing food and fuel, not discretionary purchases. That’s a big change from earlier in the pandemic when many shoppers spent freely on a range of products such as electronics and outdoor heat lamps as they spent more time at home. Large retailers including
and Walmart have said fast-changing consumer trends have led to an inventory glut of clothes, patio furniture and homegoods.
As discounts rose across the industry due to excess inventory at some retailers, Best Buy increased promotions, eating into profits, the company said. Higher supply-chain costs and lower margins associated with its membership program also ate into its profit rate during the quarter.
For the July quarter, the company reported total revenue fell 12.8% to $10.33 billion, while net income dropped more than 50% to $306 million.
Earlier this month, Best Buy cut some store jobs as it worked to increase profits. The company reported a $34 million restructuring charge related to terminations and voluntary early retirement in the most recent quarter.
The company withdrew longer-term guidance laid out in March for full year fiscal 2025 as sales declined this year more than expected, executives said. “The current macro backdrop has changed in ways that we and many others were not expecting,” Ms. Barry said. The company plans to share further financial expectations once the operating environment stabilizes, executives added.
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