NEW YORK — Best Buy continued to battle weak consumer demand for gadgets in the first quarter, but posted a profit that beat Wall Street expectations.
The Minneapolis-based retailer — the nation’s largest consumer electronics chain — predicted on Thursday that the consumer electronics slump will bottom out by the end of the year as customers who bought gadgets at the start of the pandemic will start updating their devices.
For now, Best Buy has reaffirmed its cautious financial outlook, pointing to continued economic uncertainty.
Best Buy’s sales amid the depths of the pandemic have been fueled by outsized spending by Americans splurging on gadgets to help them work from home or help their children learn virtually. Government stimulus checks have driven much of this spending. But more than a year ago, consumers started pulling back from items that were popular during the pandemic like TVs and casual wear as they became more social. Then, stubbornly high inflation has also made shoppers more selective about buying gadgets and other items.
“In this environment, customers are clearly feeling cautious and making compromise decisions as they continue to face high inflation,” said Corie Barry, CEO of Best Buy.
But the crisis should be coming to an end. The pandemic has caused many people to add more connected devices to their homes, and these devices will need to be updated or replaced. Barry told analysts on the call that, on average, US households now have twice as many connected devices as they did in 2019. Historically, customers upgrade or replace their gadgets every three to seven years, depending on the category with mobile phones at the lower end. of the spectrum, she noted.
Barry noted that customers are already starting to come at a higher rate to restock some of the gadgets. And she said a return to innovation, on hiatus amid the depths of the pandemic, should help spur a rebound in gadget purchases. She cited some items like the very first TVs designed and manufactured by Roku which are available exclusively at Best Buy stores and on bestbuy.com.
As consumer spending changes, the company has reduced its workforce; the channel has reduced its overall workforce by 20%, or 25,000 people, over the past three years. Most of them are due to attrition. Recently, the company laid off in-store consultants and designers as shoppers moved away from physical stores, but it was able to add an additional 2 million hours to sales associates, she noted.
Best Buy is also rolling out a three-tier membership program next month, including a low-cost option costing less than $50 a year, tailored to different shoppers’ needs.
Best Buy said it earned $244 million, or $1.11 per share, for the three-month period ending April 30. That compares to $341 million, or $1.49 per share, a year ago. Analysts were expecting $1.10 per share.
Revenue fell 11% to $9.47 billion from $10.65 billion a year ago. That was below analysts’ expectations for $9.53 billion.
Same-store sales – a key measure of a retailer’s health – fell 10.1% in the quarter.
Best Buy said it expects earnings per share in the range of $5.70 to $6.50 for the year. Analysts expect $6.17 per share, according to FactSet.
It projects revenues of $43.8 billion to $45.2 billion for the year. Analysts expect $44.5 billion, according to FactSet. It also forecast comparable sales to decline 3% to 6% for the year.
The shares rose 3% to close at $71.28 in trading Thursday.
