Best Buy Q3 Earnings Miss Estimates as Appliance, Electronics Sales Drop

Best Buy faced a challenging third quarter, missing key earnings expectations as consumer spending on non-essential items, including appliances and electronics, slowed. This marks the twelfth consecutive quarter of declining same-store sales, reflecting persistent economic headwinds and cautious shopping behavior.

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Earnings Performance

Best Buy reported adjusted earnings per share of $1.26, falling short of expectations of $1.29. Net sales reached $9.45 billion, below the forecasted $9.63 billion. Same-store sales dropped by 2.9% compared to the same period last year, exceeding the predicted 0.92% decline.

The company’s CEO, Corie Barry, attributed the weaker results to macroeconomic uncertainty, delayed purchases as consumers waited for holiday deals, and distractions leading up to the U.S. elections. However, Barry expressed optimism, noting a recent uptick in customer demand with the holiday season underway.

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Category Performance

Sales performance across categories showed significant disparities:

• Appliances saw a sharp decline of 14.7%, far worse than anticipated.

• Entertainment products experienced an 18.8% drop, much higher than expected.

• Consumer electronics fell 5.8%, also underperforming projections.

On a positive note:

• Computing and mobile phones sales rose by 3.8%, slightly exceeding forecasts.

• Services revenue increased 6%, narrowly beating expectations.

Revised Full-Year Forecast

In response to the quarterly results, Best Buy adjusted its full-year outlook:

• Same-store sales are now expected to decline between 3.5% and 2.5%, compared to the earlier range of 3% to 1.5%.

• Revenue projections were revised to $41.1 billion to $41.5 billion, down from $41.3 billion to $41.9 billion.

• Earnings per share are forecasted between $6.10 and $6.25, slightly lower than the previous upper limit of $6.35.

AI Products Offer Hope

Despite current challenges, Best Buy is optimistic about future growth, particularly with its focus on AI-driven products. Earlier this year, the company introduced Copilot+ PCs, which incorporate advanced artificial intelligence features. Best Buy is the exclusive retailer for about 40% of these products, highlighting its strategic positioning in the AI technology market.

CEO Corie Barry anticipates that the second half of 2024 will see a broader range of AI-enabled computers and tablets at various price points, which could drive consumer interest and sales.

Market Reaction

Following the earnings release, Best Buy’s stock fell by 7% in pre-market trading. Year-to-date, the stock had gained nearly 19%, though it trails behind the S&P 500’s 25% increase.

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