Best Buy lowers the forecast as first quarter results show a bite of inflation Associated Press
NEW YORK (AP) – Best Buy Co. released first-quarter results on Tuesday, which showed buyers cut costs and rising costs ate up profits.
The country’s largest consumer electronics network also cut its annual forecast, noting a deteriorating macroeconomic situation.
Best Buy was among several big winners in the pandemic when shoppers spent on technical equipment, such as laptops, to set up home offices to help them with remote work or meet their children’s needs for virtual learning. But like many sellers, Best Buy is struggling with rising costs on everything from labor to delivery. Electronics chains also had to overcome a global shortage of chips. And rising fuel costs and the return of shares are damaging its profits.
Meanwhile, Best Buy, like other retailers, is also adapting to changing shopping behavior. Demand for electronics is cooling as consumers return to the office and resume normal life. Inflation also forces shoppers to keep a close eye on their purchases. In particular, CEO Corey Barry told reporters during a call Tuesday that the purchases of low-income shoppers who were new Best Buy customers during the pandemic had declined recently.
Best Buy is following other major retailers, including Walmart and Target, announcing that inflation has eroded profits. Other major discounters also reported shifts in costs. Target said it does not expect consumers to return quickly to more normalized costs. Purchases of large TVs and home appliances that Americans loaded during the pandemic have disappeared, leaving Target left with bloated inventory that needs to be reduced to sell.
Among the clothing chains in malls, retailer for teens Abercrombie & Fitch posted losses in the first quarter and lowered its forecast on Tuesday.
But Nordstrom’s upscale department store chain boosted its annual forecast after strong first-quarter results that showed the retailer took advantage of customer purchases for “long-awaited occasions,” said Nordstrom CEO Eric Nordstrom. Seattle shares Nordstrom jumped more than 10% during non-business hours.
Barry of Best Buy said it expects this year’s results to be weaker than last year as it stops paying incentives and other government support and plans to increase costs in the supply chain. But she noted that macroeconomic conditions had deteriorated since he submitted his financial forecasts in early March, which led to his sales being slightly below expectations.
“Sustained high inflation is once again having a broad impact on the consumer, who we feel is being distracted at a faster and deeper pace than we originally thought,” Barry said.
Barry said Best Buy has a healthy supply of products, although she noted that there are still some isolated areas where there is a shortage.
Overall, Barry said the company is preparing for a softer sales environment but is not planning a full recession.
Neil Saunders, managing director of GlobalData Retail, said that given the many challenges, Best Buy worked pretty well. He noted that while the company has suffered from a shortage of staff due to supply problems, it still has better affordability than others, due to its size and strong relationship with suppliers. It helped him retain customers and costs, he noted.
However, Saunders said he was worried about the psyche of consumers.
“Electronics are very discreet items with high prices,” he said. He also noted that people are returning to a more normal lifestyle.
“People are less at home, many have returned to offices and classes, increased leisure activities such as sports and movies,” he added.
Best Buy, based in Richfield, Minnesota, reported first-quarter net income of $ 341 million, or $ 1.49 per share. Earnings adjusted for depreciation and restructuring expenses were $ 1.57 per share.
The results did not live up to Wall Street expectations. The average estimate of 11 analysts surveyed by Zacks Investment Research was $ 1.59 per share.
But the consumer electronics retailer made $ 10.65 billion in revenue during the period, down 8.5% from a year ago. But revenues still exceeded analysts’ forecasts. Nine analysts polled by Sachs expected $ 10.43 billion.
The company recorded a comparable decline in sales in almost all categories, with the largest drivers being computing resources and home theater. The indicator, a key indicator of a retailer’s health, measures sales in stores open for at least a year.
Domestic income on the Internet decreased by 4.9% on a comparative basis, and as a percentage of total domestic income, income on the Internet was 30.9% against 33.2% last year.
Best Buy expects full-year earnings in the range of $ 8.40 to $ 9 per share with revenue in the range of $ 48.3 billion to $ 49.9 billion. Earlier, he expected results for the stock from $ 8.85 to $ 9.15 and revenue from $ 49.3 billion to $ 50.8 billion
Analysts expected $ 8.88 per share at $ 50.17 billion a year.
Shares of Best Buy rose more than 1%, or 88 cents, closing at $ 73.47 on Tuesday.
Elements of this story were created by Automated Insights (http://automatedinsights.com/ap) using data from Zacks Investment Research. Access the Zacks Promotion Report on BBY at https://www.zacks.com/ap/BBY
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