Best Buy (BBY) earnings for Q2 2023

Televisions are seen for sale at a Best Buy store in New York City.

Andrew Kelly | Reuters

Best Buy on Tuesday said sales fell about 13% in its fiscal second quarter, as the retailer felt a pullback from inflation-weary customers.

The company confirmed its guidance for the full year. The company had cut its forecast in late July, saying it expected weaker demand for consumer electronics as people pay more for groceries and gas. It expects same-store sales to fall about 1[ads1]1% for the 12-month period ended in January.

Chief executive Corie Barry acknowledged that the financial backdrop has become choppy.

“We are clearly operating in an uneven sales environment,” she said in a press release. The company is “focused on balancing our short-term response to difficult conditions and managing well what is in our control” while working toward long-term growth, Barry added.

Here’s how the retailer did in the three-month period ended July 30 compared to what Wall Street expected, according to a survey of analysts by Refinitiv:

  • Earnings per share: $1.54 adjusted vs. $1.27 expected
  • Revenue: $10.33 billion vs. $10.24 billion expected

Softer sales, more promotions

Best Buy’s quarter reflects a sharp change in spending habits. A year ago, the retailer saw sales jump nearly 20% as shoppers bought TVs, laptops and more to maintain pandemic-driven habits like working from home and streaming movies.

Now, however, some of these patterns have faded as people return to the office or go on summer vacations. Some consumers skip big-ticket and discretionary items as they pay more for necessities.

Best Buy’s quarterly net income fell to $306 million, or $1.35 per share, from $734 million, or $2.90 per share, a year earlier. Excluding items, it earned $1.57 per share.

Sales online and at stores open at least 14 months, a key metric known as same-store sales, were down 12.1% compared to the same period last year. That’s slightly better than Best Buy’s guidance, which expected a drop of about 13% for the current three-month period.

Best Buy expects a sharper decline in same-store sales in the third quarter, CFO Matt Bilunas said in the company’s press release on Tuesday. He did not provide specific guidance but said it will be more than the 12.1% decline reported for the second quarter.

Barry said the dealership has noticed some buyers trying to stretch their budget. Some, especially those from lower-income households, are trading down to cheaper TVs or timing purchases for sales events, she told investors on an earnings call.

Still, she said, customers are willing to pay more for some brands, such as smartphones and gaming hardware.

Retailers across the industry are dealing with an abundance of unwanted goods. Walmart and Target, for example, cut their full-year earnings forecasts as they mark down items to try to move them off shelves.

Barry said Best Buy has managed its merchandise carefully to ensure it is not stuck with excess merchandise. At the end of the second quarter, she said, inventory was down 6% compared to the same period last year. That was up about 16% from the same time in 2019.

However, even with lower inventory levels, Barry said the company’s profits are under pressure as competitors discount an abundance of items with multiple promotions.

As sales soften, Best Buy has halted share buybacks. It is also in the middle of a restructuring initiative, which has included dismissals of store employees.

Best Buy said it has spent $34 million on restructuring efforts, with most of that spent on severance benefits, and it expects more in the coming months. It does not say whether it will include more layoffs.

As of Monday’s close, Best Buy shares are down about 27% so far this year. Shares closed Monday at $73.70, down less than 1%. The company’s market value is around 16.6 billion dollars.

Read the company’s earnings report here.

This story is in development. Please check back for updates.

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