MINNEAPOLIS — Editor's note: The video above first aired on KARE 11 on Nov. 16, 2023.
Best Buy Co. posted stronger-than-expected profits for the fiscal third quarter but continues to struggle with sales declines as shoppers pulled back on a broad range of items from appliances to computers and phones in an uncertain economy.
The nation’s largest consumer electronics chain, which is based in Richfield, Minnesota, also cut its annual sales outlook.
Best Buy joins a string of other major retailers reporting earnings results this week and last that have shown a further softening in consumer spending as shoppers come more under more pressure from dwindling savings, higher interest rates and still stubborn inflation.
Kohl’s posted on Tuesday a bigger-than-expected decline in quarterly sales, as customers spent less at its department stores. Lowe's, the nation's second-largest home improvement chain behind Home Depot, also reported drops in both sales and profits. It cut its annual sales outlook as it reported a big customer pullback in do-it-yourself projects.
The job market has remained resilient, but Americans are facing higher prices on many necessities like food and rent, even as the inflation rate is easing overall. And they're also facing more expensive credit with the Federal Reserve hiking benchmark interest rates to combat inflation. It’s costing more to take out loans for appliances, cars and houses, or to use a credit card. As a result, consumers have become reluctant to spend unless there is a sale.
That scenario marks a big difference from Best Buy’s sales during the depths of the pandemic, which were fueled by oversized spending from shoppers who splurged on gadgets to help them work from home or help their children with virtual learning. Government stimulus checks fueled a lot of that spending as well.
Best Buy's shares were down 3%, while Lowe's shares were down nearly 2%. Kohl's shares were down more than 13% in morning trading.
“In the more recent macro environment, consumer demand has been even more uneven and difficult to predict," said Best Buy's CEO Corie Barry in a statement.
Barry told reporters on a call Tuesday that promotions for the holidays are even better than pre-pandemic, and that it was pushing more opening price items, in particular TVs, for the holidays.
The company reported fiscal third-quarter net income of $263 million, or $1.21 per share, for the three-month period that ended Oct. 28. That compares with $277 million, or $1.22 per share, in the year-ago period. Earnings, adjusted for non-recurring costs and amortization costs, were $1.29 per share. The average estimate of 13 analysts surveyed by Zacks Investment Research was for earnings of $1.19 per share.
The consumer electronics retailer posted revenue of $9.76 billion in the period, falling short of Street forecasts. Eleven analysts surveyed by Zacks expected $9.88 billion. In the year-ago period, sales were $10.59 billion.
Comparable sales — business coming from its stores and its online channels — fell 6.9% in the quarter.
Best Buy expects full-year earnings in the range of $6 to $6.30 per share, with revenue in the range of $43.1 billion to $43.7 billion. That compares to prior revenue guidance of $43.8 billion to $44.5 billion.
Analysts are expecting $6.19 per share on revenue of $44.14 billion.
It also expects a comparable sales decline of 6% to 7.5% for the year, deeper than the previous guidance of a decline of 4.5% to 6%.
WATCH MORE ON KARE 11+
Download the free KARE 11+ app for Roku, Fire TV, Apple TV and other smart TV platforms to watch more from KARE 11 anytime! The KARE 11+ app includes live streams of all of KARE 11's newscasts. You'll also find on-demand replays of newscasts; the latest from KARE 11 Investigates, Breaking the News and the Land of 10,000 Stories; exclusive programs like Verify and HeartThreads; and Minnesota sports talk from our partners at Locked On Minnesota.
- Add KARE 11+ on Roku here or by searching for KARE 11 in the Roku Channel Store.
- Add KARE 11+ on Fire TV here or by searching for KARE 11 in the Amazon App Store.
- Learn more about the KARE 11+ app for Apple TV in the Apple App Store.
- Learn more about KARE 11+ here.
Watch more local news:
Watch the latest local news from the Twin Cities and across Minnesota in our YouTube playlist: