Electronics retail chain Best Buy reported that its sales and profits were “better-than-expected” for the second quarter ending August 3, despite a decline in overall revenue.
Domestic revenue fell 3 per cent to $8.62 billion, mainly due to a 2.3 per cent decrease in comparable sales, driven by weaker performance in appliances, home theater, and gaming categories.
However, the company said it saw growth in its tablet, computing, and services sectors, which together posted comparable sales growth of 6 per cent versus last year.
Online sales also dropped slightly by 1.6 per cent but remained a significant portion of total domestic revenue.
Best Buy CEO Corie Barry said that the company is focused on enhancing customer experiences and adapting to consumer behaviour, which shows a preference for value and high-price-point products.
“We are balancing our optimism in both the industry and our positioning with a pragmatic approach to likely uneven customer behaviour going forward,” he added.
International revenue declined by 4 per cent to $665 million due to “unfavourable” exchange rates and a 1.8 per cent drop in comparable sales.
Gross profit margins also declined from 24.2 per cent to 23.9 per cent, primarily due to lower product margins and increased supply chain costs.
Looking ahead, CFO Matt Bilunas said the company expects the electronics industry to stabilise.
“Last quarter, we said we believed we were likely trending towards the midpoint of our original comparable sales guidance, and today, we are updating our annual comparable sales guidance range to a decline of 1.5 to 3 per cent,” he continued.
“At the same time, we are raising our non-GAAP diluted EPS guidance range as we largely flow through the better-than-expected profitability of the first half of the year.”
Neil Saunders, MD at GlobalData, said Best Buy’s continued revenue decline cannot solely be attributed to market resetting post-pandemic or weak consumer finances.
“The big problem here is that while sales at Best Buy have not bottomed out, the overall market has, and it is now coming back into growth,” he said, pointing to a modest 1.2 per cent increase in electronics sales in the US.
Saunders warned that while market stabilisation and lower interest rates might help Best Buy in the long term, the company faces a broader challenge of maintaining relevance in the evolving electronics sector.
“This isn’t just a battle to move back into positive territory; this is a battle for relevance in the electronics market,” he remarked.
“And, at present, we see Best Buy on the losing side of the battle, even if it has not yet lost the entire war.”
