Best Buy (BBY) Q3 2023 Earnings

A customer watches as Best Buy employees load his new television into his car during the state’s sales tax-free weekend, starting Saturday.

Erin Clark | Boston Globe | Getty Images

Best buy It beat Wall Street’s expectations for quarterly earnings on Tuesday as demand for expensive, inflation-dented consumer electronics fared better than feared.

The consumer electronics retailer, which had cut its forecast this summer, reiterated its forecast for the holiday quarter. It raised its full-year forecast to reflect the pace, saying it expects comparable sales to decline about 10%.

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Shares of the company rose more than 11% on Tuesday. The stock is trading around $78 after hitting a 52-week low of $60.78 in October.

Here’s how the retailer did it for the three-month period ending Oct. 29 than Wall Street anticipated, according to a poll of Refinitiv analysts:

  • Earning per share: $1.38 adjusted versus $1.03 expected
  • Income: $10.59 billion versus $10.31 billion expected

While Best Buy’s quarterly results were better than expected, demand is down since the peaks of the pandemic, when consumers turned to its stores for home theaters, computer monitors, kitchen appliances and more as they worked, played and they cooked at home.

Net sales for the fiscal third quarter decreased approximately 11% from $11.91 billion year over year in the third quarter. Net income fell to $277 million, or $1.22 per share, from $499 million, or $2 per share, a year earlier.

During a call with investors, CEO Corie Barry said sales were down in most of Best Buy’s product categories, with the biggest declines in computing and home theater. However, it said, compared to the same quarter in 2019, its IT revenues increased 23% and its equipment revenues remain 37% higher.

Even as consumers were paying more for groceries, gas and housing, he said the retailer “has seen relatively consistent behavior from our buying customers.” But she added that buyers have a lot of interest in sales events.

“We can also see among consumers that savings are being reduced and credit utilization is increasing,” Barry said on the investor call. “And value clearly matters to everyone.”

Best Buy is staring at a more uncertain sales environment this holiday season. Some inflation-hit consumers are retiring discretionary items and spending more money on necessities and experiences. The company joined other retailers in trimming its prospects this summer. It said at the time that it expects same-store sales to decline by about 11% for the 12-month period ending in January.

A month after Best Buy warned of slowing sales, it has cut jobs across the country.

Among consumers we can also see that savings are being reduced and credit usage is increasing.

However, so far, the company has exceeded their expectations.

Comparable sales fell 10.4%, less than the 12.9% decline expected by analysts, according to FactSet. The key metric, also called same-store sales, tracks sales online and in stores that have been open for at least 14 months.

It was also a smaller drop than the retailer anticipated. Best Buy hadn’t provided specific guidance for comparable sales in the third quarter, but its Chief Financial Officer Matt Bilunas warned it would decline more than the 12.1% decline in the second quarter.

The company said it has resumed share buybacks, which it halted when it removed its forecast in July. Best Buy said it plans to spend about $1 billion on share buybacks this year.

Best Buy, however, continues to see inflation change buying patterns. In a call with reporters, Barry said some low-income consumers have opted for less expensive TVs. On the other hand, he said, some more affluent consumers choose premium products and upgrade to more feature-rich laptops when they replace them.

As the level of promotions increases, CEO Barry said the company is closely monitoring its inventory, which is down 14.7% year over year. The retailer has forecast a decline in demand and went through a period a year ago where shipments arrived both early and late due to supply chain issues.

Inventory has been a closely watched metric in the retail industry, as many businesses are faced with a glut of unwanted goods and have had to mark items, cancel orders, or pack and store goods.

Barry said in an investor call that holiday shopping patterns are also shifting towards a more typical pre-pandemic pattern. He said the retailer expects customers to spend more during Black Friday, Cyber ​​Monday and the two weeks leading up to Christmas.

Shares of Best Buy are down about 30% so far this year, underperforming the S&P 500. Shares closed Monday at $70.83, down nearly 2%. The market value of the company is $15.95 billion.

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