Best Buy posts another quarterly sales decline, while Kohl’s sees decline deepen

On November 27, 2024By Littum

NEW YORK (AP) – Best Buy, the nation’s largest consumer electronics chain, reported another quarterly drop in sales as Americans continued to tighten their wallets on appliances and gadgets to focus on the essentials.

The Richfield, Minnesota-based retailer lowered its annual sales and earnings outlook. Best Buy CEO Corie Barry also warned that shoppers are likely to pay more for purchases that reflect higher costs as President-elect Donald Trump promises to impose sweeping tariffs on products from China and Mexico.

Meanwhile, Kohl’s posted third-quarter results that showed a deepening crisis and predicted sales declines for the year will be worse than expected. The results came a day after the Menomonee Falls, Wis.-based retailer announced that Michaels CEO and retail veteran Ashley Buchanan takes over his top job with effect from January 15.

Best Buy shares fell nearly 8% in afternoon trading, while Kohl’s shares plunged nearly 19%.

As the last batch of major retailers report third-quarter results this week, winners and losers are emerging on Black Friday, the official start of the holiday shopping season.

Macy’s reported Monday stronger than expected sales for the third quarter, and said it is delaying the release of its full quarterly results, set for Tuesday, after it discovered an employee intentionally hid up to $154 million in expenses over several years.

Walmartthe nation’s largest retailer, reported another quarter of stellar sales last week as its low-price model proved a strong draw for inflation-weary shoppers. But Goal, whose business relies on discretionary purchases such as clothing and accessories, reported sluggish sales and falling profits in the fiscal third quarter as customers cut back on spending on non-essential items.

On a call with analysts Tuesday, Best Buy’s Barry said the chain was struggling with economic uncertainty, shoppers waiting for deals and the disruption in the run-up to the election, particularly in non-essential categories. Sales are back on track, but Barry noted that the season will be very promotional.

Best Buy started Black Friday sales on Nov. 21, a week earlier than last year. It’s also bringing back doorbusters — in limited-time deals on specific products only — every Friday from November 8 to December 20 online, in-store and on the app.

“We are managing well what we can control in what remains a volatile environment,” Barry said on the call.

Like other retailers, Best Buy is also bracing for Trump’s threat to impose cowardly new tariffs on Mexico, Canada and China as soon as he takes office as part of his efforts to crack down on illegal immigration and drugs.

Barry said the company believes diversifying purchases in consumer electronics is a “good thing, but it’s also very difficult to do.” The supply network is complex, as are the manufacturing facilities for consumer gadgets, she said.

Also, Best Buy has very little control over purchasing, importing only about 2% to 3% of the cost of goods sold, she said. Most of it has been moved out of China.

But Barry says the retailer is dependent on its suppliers, estimating that 60% of the company’s cost of goods sold comes from China. The second largest importing country is Mexico.

Best Buy has a team looking at how tariffs will affect its business, but she said the retailer is operating on very thin profit margins. So while suppliers and the company will bear some costs, Best Buy will have to pass on much of the higher costs of the tariffs to its customers in the form of higher prices.

“These are items that people need, and higher prices are not helpful,” Barry said.

Best Buy earned $273 million, or $1.26 per share, for the quarter ended Nov. 2. That compares with $263 million, or $1.21 per share, a year ago. Sales fell to $9.45 billion from $9.76 billion in the year-ago quarter. Analysts expected earnings of $1.30 per share on sales of $9.63 billion, according to FactSet.

Comparable sales – sales from online channels and brick-and-mortar stores – fell 2.9% in the quarter.

The company said sales of appliances, home theater and games fell. This was partially offset by growth in the computers, tablets and services categories.

Best Buy now expects annual sales in the range of $41.1 billion to $41.5 billion, down from previous guidance of $41.3 billion to $41.9 billion. Analysts were expecting $41.54 billion, according to FactSet analysts.

It now expects that the earnings per stock will be in the range of $6.10 to $6.25, which compares with previous guidance of $6.10 to $6.35. Analysts expected $6.26 per share.

Kohl’s reported earnings of $22 million, or 20 cents per share. share, in the quarter ended November 2. That compares to $59 million, or 53 cents per share. share in the same period last year. Sales fell to $3.51 billion from $3.84 billion. Analysts had expected earnings of 28 cents on sales of $3.63 billion.

For the year, Kohl’s expects comparable sales to decline 6% to 7% and expects net revenue to decline 7% to 8%. The company expects annual earnings per share between $1.20 and $1.50, compared with the average Street estimate of $1.78 per share.