Best Buy’s sales at the height of the pandemic were fueled by heavy spending from shoppers who splurge on gadgets to work from home or help their kids learn virtual. Government stimulus measures also boosted spending last year. So, like many retailers, Best Buy entered this year expecting to perform worse than it did in 2021 as the stimulus package fades and shoppers maintain their more normal pre-pandemic lifestyles. I was.
But with prices for essentials like food and gas skyrocketing, families need to be more cautious. They’re doing without new clothing, electronics, furniture, and pretty much everything else they don’t absolutely need. Almost overnight, Americans who were stuck at home during the pandemic began spending money on dining out, movies and concerts, and travel.
As a result, companies are ramping up discounts to clear excess inventory for the all-important fall and holiday seasons. As a result, it hit the business of every kind of retailer, from Target to Macy’s.
“There has never been a time like this,” Best Buy CEO Corie Barry said in response to a reporter’s question. “We have never seen a shocking amount of government stimulus thwarted by geopolitical instability to upend consumer behavior,” she said.
Inflationary pressures on food, rent and gas are forcing shoppers to cut prices in certain categories such as televisions, Barry said. However, when it comes to mobile phones, we are replacing them with the same or similar models as before. They are also focused on trading, she added.
Barry noted that inventory in the second quarter was actually down 6% from the same period last year. However, it is up about 16% from the pre-pandemic fiscal year 2020.
Barry said at a press conference on Tuesday that the company’s inventory levels are healthy, but that it is competing with excess inventories across the retail industry. This aggressive industry-wide price cut will force Best Buy to cut prices as well, and shoppers will start cutting prices earlier for the holiday shopping season. Rising supply chain costs and lower margins related to membership programs also impacted margins in the quarter.
Minneapolis-based Best Buy warned in July that sales would fall more than expected. The company predicted he would see an 11% drop in sales this year for stores he’s opened for at least a year. As for the second quarter of the fiscal year, comparable sales in July he said were down 13%.
Best Buy reported a 60% decline in net income to $306 million, or $1.35 per share, in the three months ended July 30. Revenue decreased 13% to $10.33 billion.
Analysts had expected $1.27 per share on sales of $10.27 billion, according to FactSet.
Comparable sales (sales of stores that have been open for at least one year) decreased by 12.1% compared to 19.6% in the same period last year.
Domestic gross margin was 22.0%, compared with 23.7% last year. This is partly because the company has stepped up discounts to move inventory.
Minneapolis-based Best Buy warned in July that sales would fall more than expected. The company predicted he would see an 11% drop in sales this year for stores he opened for at least a year. As for the second quarter of the fiscal year, comparable sales in July he said were down 13%.
This year, Best Buy is sticking to its previous forecast of an 11% decline in comparable sales.
Heading into the third quarter, the company expects organic sales to decline slightly from the 12.1% decline reported in the second quarter.
The stock rose $1.66 to $75.36 in afternoon trading.
Follow Ann Dinocenzio: http://twitter.com/ADInnocenzio