Dive Brief:
- Best Buy’s second quarter revenue fell 3% year over year from $9.6 billion to $9.3 billion. Domestic revenue was $8.6 billion for the quarter, a 3% decline from a year ago. Overall comparable sales fell 2.3%, according to a company press release.
- Domestic online revenue was $2.7 billion, down 1.6% on a comparable basis. Net earnings rose 6.2% year over year to $291 million, up from $274 million. Operating income was also up 10% to $383 million from $348 million a year ago.
- Best Buy raised its full-year adjusted earnings per share guidance Thursday. The retailer also now expects revenue of $41.3 billion to $41.9 billion, versus prior guidance of $41.3 billion to $42.6 billion and a comp sales decline of 1.5% to 3% instead of a flat to 3% decline.
Dive Insight:
CEO Corie Barry said during an earnings call she expects the consumer electronics industry to show increasing stabilization as the retailer looks to the back half of this year.
The retailer has struggled in recent quarters. In Q4 Best Buy reported flat revenue of $14.6 billion and a comp decline of nearly 5%. For the full year, the retailer saw a 6% decline in revenue to $43.5 billion. The company’s performance remained soft into Q1. Comps fell 6.1% year over year in the first quarter and revenue declined 6.5% to $8.8 billion from $9.5 billion a year earlier.
Wedbush analysts led by Seth Basham characterized the company’s Q2 results as “better than expected,” saying in a Thursday note that the comp decline of 2.3% was less than their forecast of a 4% decline and consensus estimates of a 3.2% decline.
Best Buy reported comp sales growth in tablets, computing and services but that growth was offset by declines in appliances, home theater and gaming. Barry also said customers were attracted to “predictable sales moments” during the quarter, like Fourth of July, the company’s Black Friday in July sales event — which coincided with Amazon’s Prime Day — and back-to-school shopping.
Although the macroeconomic environment can change quickly, “we see a consumer who is seeking value in sales events and one who is also willing to spend on high price point products when they need to or when there is new, compelling technology,” Barry said during an earnings call. “We don't believe anything in our data signals that customer behavior has changed in a way that would make us increasingly cautious.”
However, Neil Saunders, managing director of GlobalData, described Best Buy’s latest results as weak. He also noted that while Best Buy’s sales haven’t bottomed out, the overall market has, and it is now shifting back to growth.
Saunders said the company’s predicament raises the question of why its losing market share.
“One of the main factors is that its stores are much less of a destination than they once were,” Saunders said in emailed comments. “Consumer interest in electronics remains far from robust and purchase dynamics are more about replacement and modest upgrades. These kinds of purchases often do not require deep specialist knowledge and are ones where consumers hunt around for the best bargains and deals. This plays firmly against Best Buy and into the hands of generalists like Walmart or Target and online players like Amazon.”
Barry said Best Buy is in the process of updating the merchandising presentation across multiple categories throughout its store fleet. Although not every store will receive the same updates, overall plans include refreshing the mobile phone, headphone, smart home and digital imaging areas.
The company plans to create new experiences in tablets, gaming and computer monitors. The company last month announced that it is updating or creating new branded in-store experiences with several vendor partners, including GoPro, Tesla, Lovesac , Greenworks and Starlink. Best Buy also said it wants to play a larger role in helping consumers discover new tech.
Saunders said Best Buy’s efforts to manage costs and grow the bottom line are helpful for the company’s stability. “However, it is not a long term solution and it eventually needs to be accompanied by some better numbers on the top line. Unfortunately, it does not look like these will be delivered before we move into 2025,” Saunders said.
