Best Buy Co. rose the most in nine months after executives said that a painful sales slump in consumer electronics and household appliances is showing signs of easing.
(Bloomberg) — Best Buy Co. rose the most in nine months after executives said that a painful sales slump in consumer electronics and household appliances is showing signs of easing.
Total comparable sales are likely to be “slightly better” in the third quarter than the 6.2% drop in the second, the retailer said Tuesday as it reported results. The measure will continue to improve in the fourth quarter with a performance that will range from a decline of 3% to potentially even a slight increase, Chief Executive Officer Corie Barry said on a conference call.
“Next year the consumer electronics industry should see stabilization and possibly growth driven by the natural upgrade and replacement cycles and the normalization of tech innovation,” Barry said.
The slowly improving performance signals a measure of relief from a sharp downturn that began more than a year ago as US consumers retreated from electronics and other discretionary goods after binging during the pandemic. While Best Buy still has a long road to recovery, sales are at least starting to come off the bottom.
“Despite sluggish discretionary spending, we think that we are getting closer to cycling all of the Covid-related pull forward that essentially started 3.5 years ago,” Truist Financial Corp. analyst Scot Ciccarelli said in a note to clients.
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The shares rose 5.5% at 11:22 a.m. in New York after climbing as much as 6.1% for the biggest intraday gain since November 22. Best Buy slid 7.7% this year through Monday, while the S&P 500 index advanced 15%.
There’s still reason for caution as shoppers shy away from many big-ticket items, said Neil Saunders, managing director of GlobalData.
“Best Buy’s view that demand will start to strengthen as the company moves into next year is possible, but perhaps a shade optimistic,” he said in a note to clients.
During the fiscal second quarter, which ended in late July, Best Buy’s adjusted earnings fell to $1.22 a share. Analysts had estimated $1.07. US comparable sales fell 6.3% during the latest quarter, the shallowest decline in more than a year and in line with analyst estimates.
TV sales returned to growth in terms of units, Barry said. Laptop-computer sales also improved by that measure, with units flat from last year.
“That is a pretty material trajectory change from what we had seen before,” she said on a call with reporters.
Looking ahead, new video games set for release later this year will fuel additional gains in gaming revenue. Barry said US consumers are “in a good place” but making trade-offs as they juggle price pressures and new headwinds such as the coming resumption of student-loan repayments. Shoppers will be looking for deals during the holidays, much as they did before the pandemic, she said.
For the fiscal year as a whole, the company forecast adjusted earnings of $6 to $6.40 a share. At the midpoint, that was 10 cents higher than the previous outlook.
Best Buy, which gets almost all its revenue from the US, said total comparable sales would slide at least 4.5%, worse than the decline of at least 3% it predicted in May. The measure fell about 8% during the first half of the year.
(Updates with analyst comment in fourth paragraph and CEO commentary)
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