Best Buy largely misses earnings estimates as consumers pull back on appliances and electronics

On By Littum

Even artificial intelligence couldn’t make up for declining consumer demand at Best Buy ( BBY ).

For the 12th quarter in a row, the retailer posted negative same-store sales growth, down 2.9% year over year versus estimates of a 0.92% decline. Net sales of $9.45 billion and adjusted earnings per share of $1.26 also missed expectations of $9.63 billion and $1.29 per share, respectively.

Best Buy CEO Corie Barry attributed the miss to “a combination of general persistent macro uncertainty, customers waiting for deals and sales, and distraction during the run-up to the election, particularly in non-essential categories” in an earnings call.

In the quarter, home appliance and entertainment sales fell 14.7% and 18.8%, respectively, compared to estimates for declines of 7.5% and 4%. Sales of consumer electronics fell 5.8 per cent.

Computer and mobile phone sales rose 3.80%, while service revenue rose 6%, both slightly above estimates.

The company expects fourth-quarter same-store sales growth to be flat to a 3% decline, reducing optimistic views that demand stabilized after the pandemic.

“Fourth quarter sales (are) a sequential improvement,” Barry told reporters in a media call. “We like what we’re seeing early in the holiday season — a bit better than our expectations.”

This year, the company started Black Friday sales a week early as consumers hunted for value.

Best Buy shares fell 7% in early trading. As the market closed Monday, shares were up nearly 19% year-to-date, trailing the S&P 500’s ( ^GSPC ) gain of 25%.

Here’s what Best Buy posted for the third quarter compared to Bloomberg consensus data estimates:

Adjusted earnings per stock: $1.26 vs. $1.29

Net turnover: $9.45 billion versus $9.63 billion

Overall same-store sales growth: -2.9% against -0.92%

Overall same-store sales growth in the US: -2.8% against -1.04%

Sales growth for:

  • Appliances: -14.7% against -7.5%

  • Entertainment: -18.8% against -4%

  • Consumer electronics: -5.8% against -2.72%

  • Computers and mobile phones: 3.8% vs. 3.5%

  • Services: 6% against 5.83%

International: -3.7% against -0.57%

The company has updated its expectations for the whole year. Same-store sales are expected to decline 2.5% to 3.5%. That compares with a previously expected decline of 1.5% to 3%.

Revenue for the year is expected to be $41.1 billion to $41.5 billion, down from the previous range of $41.3 billion to $41.9 billion.

Earnings per stock guidance was updated to a range of $6.10 to $6.25, compared to a previous range of $6.10 to $6.35.

Barry said the company is at an inflection point as “layers of pressures that have been on the business,” such as inflation, the housing market, consumer spending on experiences and a lack of new products, begin to change.