Best Buy (BBY) continues to struggle with sluggish sales as consumer demand fades after surging during the pandemic.
The electronics retailer reported mixed results for the first quarter of fiscal 2025 on Thursday before the market opened. Adjusted earnings per share were $1.20, beating estimates of $1.08. But its net sales of $8.85 billion were a decline compared to $9.47 billion last year and the $8.97 billion expected for this quarter.
CEO Corey Barry told Yahoo Finance that consumers remain “unequal” in a media call, as they continue to prioritize necessities like food, fuel and housing.
Best Buy’s total U.S. sales fell 6.3%, led by declines in appliances (down 18.5%), entertainment (down 11.3%), and consumer electronics (down 8.3%).
Computers and mobile phones fell just 2.2%, compared to an expected decline of 4.17%, while international sales fell 3.3%.
Online sales decreased by 6.1% during the quarter; It accounted for 30.8% of total US revenue, just over 30.5% from last year.
The company’s services category, such as membership offerings, helped boost earnings in the United States, resulting in “better-than-expected profitability in the first quarter,” Barry said in the statement.
In the first quarter, the gross domestic profit rate reached 23.4%, compared to 22.6% last year. The company also incurred $15 million in restructuring fees due to the termination. The company has “re-engineered” its workforce to increase the number of front-line workers and “remove layers of leadership” elsewhere as consumers gravitate toward in-store pickup, Barry said.
For the fiscal year, the company reiterated its guidance for total sales to decline between 3% and 0%.
Before the report, the stock was down about 7% year to date, compared with the 11% gain for the S&P 500 (^GSPC).
The company’s shares jumped more than 11% Thursday morning after the report. “Given the stock’s year-to-date weakness,” Citi analyst Stephen Zacconi said, he expects shares to trade “higher today based on improved profitability.”
Concerns about discretionary spending, as well as uncertainty about when the replacement cycle will begin, are impacting the outlook for the company.
Bank of America analyst Robert Ohms, who maintains an underperform rating on the stock, wrote in a client note that he expects “continued weakness in the appliance category given year-over-year price declines and higher retail promotions as well as potential market share.” Pressure from competitor Costco.”
But there is optimism from Barry that innovation around AI could start the replacement cycle early, with products like AI-focused PCs and AI-enabled Samsung phones.
“Those [AI products] They tend to start at a higher price point; “There is definitely a consumer who fundamentally believes that the value proposition of these devices will make them more productive,” Barry said on the media call.
Pre-orders for the AI-enabled laptops are “slightly exceeding” early expectations, although overall numbers are not high since consumers want to do their research and see the laptops in person. The HP (HPQ) EliteBook Ultra AI PC will debut on June 18.
Barry added that as new products emerge, usually at higher prices, the price of the latest generation could be reduced to become attractive to people looking to upgrade from older devices.
However, it remains to be seen how in demand the latest and greatest will be, as adoption of many AI applications is still limited among mainstream users.
Joe Feldman of Telsey Consulting Group wrote in a client note that he expects more momentum as “new technology hits the market” for the back-to-school season.
Jonathan Matuszewski of Jefferies expressed a similar idea, calling it a “replacement cycle.” [is] is gaining traction,” as customers search for “consumer electronics, gaming consoles, home theater systems, and other related products.”
Earnings collapse
Here’s what Best Buy reported, compared to Wall Street estimates, according to a Bloomberg consensus:
Adjusted earnings per share: $1.20 vs $1.08
Net sales: $8.85 billion versus $8.97 billion
Total US sales: -6.30% vs. -5.02%
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Hardware: -18.50% vs. -9.92%
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entertainment: -11.30% vs. -2%
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Consumer Electronics: -8.30% vs. -6%
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Computers and mobile phones: -2.20% vs. -4.17%
international: -3.30% vs. -3%
The company also shared its revenue forecast, which is expected to range between $41.3 billion and $42.6 billion for this year.
For the second quarter, it expects same-store sales to decline about 3%.
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Brooke DiPalma is a senior reporter at Yahoo Finance. Follow her on Twitter at @Brooke De Palma Or email her at [email protected].
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