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NEW YORK (AP) — Best Buy, the USA’s leading consumer electronics retailer, reported its third consecutive quarterly sales decline as Americans continue to prioritize essential spending, curtailing their expenditure on gadgets and appliances.
Reflecting the current market conditions, the Richfield, Minnesota-based retail giant has lowered its annual sales and profit forecast. Furthermore, Best Buy’s CEO Corie Barry cautioned that customers may soon face higher prices for purchases due to the impending tariffs on Chinese and Mexican imports, as announced by President-elect Donald Trump.
Kohl’s, another prominent retailer, reported a dismal third-quarter performance, with sales plummeting and a bleak forecast for the year. This news came on the heels of the company’s announcement that Ashley Buchanan, the CEO of Michaels, will be taking over as its new CEO, effective January 15. The Menomonee Falls, Wisconsin-based retailer’s struggles were reflected in its stock price, which plummeted nearly 19%.
Meanwhile, Best Buy’s shares experienced a significant decline of almost 8% in afternoon trading. As major retailers begin reporting their third-quarter earnings, a mixed picture is emerging, just as the holiday shopping season is set to kick off with Black Friday.
Macy’s reported strong third-quarter sales, exceeding expectations, but delayed the release of its full quarterly results due to the discovery of an employee’s deliberate concealment of expenses totaling up to $154 million over several years.
Walmart, the nation’s largest retailer, reported impressive sales growth last week, thanks to its low-price business model, which proved to be a significant draw for price-conscious consumers. Conversely, Target reported sluggish sales and declining profits as customers cut back on discretionary spending on clothing and accessories.
During a conference call on Tuesday, Best Buy’s CEO Corie Barry attributed the company’s struggles to economic uncertainty, customers waiting for deals, and the disruption caused by the presidential election, particularly in non-essential product categories. She noted that sales have started to rebound, but the upcoming season is expected to be extremely promotional.
Best Buy launched its Black Friday sales on November 21, a week earlier than last year, and will be offering limited-time doorbuster deals every Friday from November 8 to December 20, both online and in-store.
“We’re managing what we can control in a volatile environment,” Barry said during the call.
Like other retailers, Best Buy is preparing for the potential impact of Trump’s proposed tariffs on Mexico, Canada, and China, which could have far-reaching consequences for the consumer electronics industry.
Barry stated that while diversifying sourcing is a positive step, it’s a complex and challenging process, particularly in consumer electronics. She highlighted that the company directly imports only 2% to 3% of its cost of goods sold, with the majority of that already shifted out of China.
Best Buy relies heavily on its vendors, with approximately 60% of its cost of goods sold coming from China. The company’s second-largest importing country is Mexico. Barry emphasized that vendors and the company will absorb some costs but ultimately, customers will face higher prices as Best Buy operates on thin profit margins.
“These are essential goods, and higher prices won’t be helpful,” Barry cautioned.
For the quarter ended November 2, Best Buy reported earnings of $273 million, or $1.26 per share, down from $263 million, or $1.21 per share, in the same period last year. Sales declined to $9.45 billion from $9.76 billion.
Analysts had anticipated earnings of $1.30 per share on sales of $9.63 billion, according to FactSet. Comparable sales, encompassing both online and physical store sales, fell 2.9% during the quarter.
Best Buy saw a decline in appliance, home theater, and gaming sales, partially offset by growth in computing, tablets, and services categories.
The company now expects annual sales to be in the range of $41.1 billion to $41.5 billion, down from its prior guidance of $41.3 billion to $41.9 billion. Analysts had projected $41.54 billion.
Best Buy also revised its earnings per share guidance to $6.10 to $6.25, compared to its previous range of $6.10 to $6.35. Analysts had expected $6.26 per share.
Kohl’s reported earnings of $22 million, or 20 cents per share, for the quarter ended November 2, compared to $59 million, or 53 cents per share, in the same period last year. Sales dropped to $3.51 billion from $3.84 billion.
Analysts had anticipated earnings of 28 cents per share on sales of $3.63 billion. For the year, Kohl’s expects comparable sales to decline 6% to 7% and anticipates net sales to fall 7% to 8%. The company forecasts annual earnings per share between $1.20 and $1.50, compared to the average analyst estimate of $1.78 per share.
