Photo: Best Buy
Best Buy cuts forecast in glass half full announcement
Best Buy has downwardly revised its second quarter and full-year forecast, but the news is not all bad, according to its CEO Corie Barry.
The consumer electronics chain said that it now expects its second-quarter same-store sales to decline 13 percent compared to the 19.6 percent gain it posted at the same time last year. Best Buy said its second-quarter comps would come in around 7.5 percent higher than its second-quarter pre-pandemic results in 2019.
The retailer was never expecting to top last year’s second-quarter results that received a boost from federal stimulus payments and unusually high demand for the products it sells as more Americans spent time at home for school and work as a result of COVID-19.
Best Buy is now expecting same-store sales to fall around 11 percent for the year. This compares to its previous guidance of a decline between three and six percent. The retailer now sees its operating income coming in at around four percent for the year, down from 5.2 to 5.4 percent before. The company said it would “continue to actively assess further actions to manage profitability” going forward.
The chain grows a list of brands and retailers that have downwardly revised forecasts for the year including Adidas, Gap, Kohl’s, Target and Walmart, CNBC reports.
“While our financial results are not where we expected them to be this year, our sales continue to be higher than they were pre-pandemic,” said Ms. Barry. “We remain a strong, profitable company with a unique position in an extremely innovative, vibrant industry that is more relevant than ever in the lives of consumers. We are confident in our team and our strategy and excited about the opportunities ahead.”
Best Buy has continued to move into new categories including health and outdoor living products as it seeks to connect consumers and technology in all aspects of daily life.
The retailer is also testing new store concepts including a digital-first, small box store in Monroe, NC. The showroom format features a curated selection of “best-on-category products” in audio and home theater, cameras, cellphones, computing, small appliances, smart home tech and wearables.
- Best Buy Provides Update on Second Quarter Performance and Fiscal 2023 Outlook – Best Buy
- Best Buy cuts its outlook, joining other retailers as inflation pressures shoppers – CNBC
- Will Best Buy’s latest acquisition be a healthy addition for the chain? – RetailWire
- Will Americans invite Best Buy into their backyards? – RetailWire
- Best Buy offers a new way to shop with its first-ever digital-first small box store – RetailWire
- Has Best Buy found an outlet for future growth? – RetailWire
Discussion Questions
DISCUSSION QUESTIONS: Do you see Best Buy as a stronger or weaker retail company today than it was a year ago and before the pandemic? What should and shouldn’t Best Buy do as it navigates through the second half of 2022?
Poll
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Jeff Sward
Founding Partner, Merchandising Metrics
Gary Sankary
Retail Industry Strategy, Esri
The proper comparison is not with a year ago — when people staying home more and massive stimulus boosted electronics sales. The appropriate comparison is with the pre-pandemic period. Against this yardstick, Best Buy has performed well with revenue up by 7.5%. So, by that measure, it is a stronger company. Quite honestly, there is nothing fundamentally wrong with Best Buy’s business model. It is just cycling through a lower period of demand. It remains innovative, experimental and relevant and that will secure its long-term health.
I agree. It is so important to post statistics in the proper context. Consumers have not been staying home so much as during the pandemic for months now. Why should the industry expect that sales would just continue to increase when, in fact many if not most consumers already purchased their entertainment suite during the pandemic?
Well, they do have a space problem — as in too much. No more CDs, speakers are now small … so the smaller store is definitely their future.
All the rest, I heartily agree with (except the CEO saying it’s about ORC — that’s called “storytelling time” and is a very popular pastime in earnings season.
Best Buy is a stronger company than it was a year ago, despite the lower, recently announced same-store sales results. Best Buy performed very well as the work-from-home movement became a mega trend during the pandemic. Naturally, sales are starting to normalize, but I believe that the lessons learned through the pandemic have made Best Buy a more capable and resilient retailer. There is still plenty of uncertainty ahead, but Best Buy appears to be navigating well, and the new initiatives introduced help position them well for the future.
Best Buy has performed quite well given the hurricane-strength headwinds it and other retailers are facing, coupled with its narrow business model. Best Buy has done a good job of diversifying its way out of the category-killing hole by refining its suite of solutions and services and expanding category reach without taking it too far.
Best Buy has never been shy about making changes to its business to drive efficiency and react to consumer demand. They are more nimble now than they’ve ever been. They’ve made changes to fulfillment modes to adapt to consumer demand for more United Commerce capabilities. Sales in discretionary categories are obviously impacted by economic conditions. I believe Best Buy’s ability to adapt and change has made them a stronger company.
Best Buy is an innovative retailer with a realistic and macro-aware CEO and board. The business cycle is a given, and companies must be able to navigate and adapt accordingly (up or down). I have more confidence in that type of company and team compared to one that blindly guides higher in the face of ferocious headwinds — they’re either misleading investors or are oblivious to future demand.
The surge that Best Buy experienced during the pandemic was the customer making it known that Best Buy is the go-to retailer for home electronics and appliances. Of course they were going to have negative comps against the 19% surge. Thanks to well satisfied demand and now inflation, sales have cooled. But Best Buy has demonstrated its strength. Now the lesson is managing expectations, both internally and externally, in a murky global economic and political environment.
It is brutal that stores are expected to have a crystal ball for predicting the unpredictable. As we continue to live through a once in a lifetime pandemic (we hope only once), it is clear that predictability is virtually impossible.
Low numbers don’t make them a weaker store — merely a retailer living through an unpredictable cycle.
Last year was an anomaly, as was the year before. And, America is a much different place than it was before the pandemic, so benchmarking off pre-pandemic patterns doesn’t make much sense. As to what Best Buy should do, I’d advise getting even closer to the consumer and holding on with both hands.
Respect for Best Buy as they focus their business plan and strategy to morph their stores, product offerings and a better overall customer experience — regardless of Wall Street. They are making all the right moves. Sales and customer loyalty should continue to grow over the long haul.
The shopping experience needs a complete overhaul. Make the store a destination for a reason. When was the last time you were invited to a Best Buy store to view or experience something new in technology or electronics? One hundred percent of my flat screens, sound systems, three component stereo systems are from Best Buy. I’ve been a member of the loyalty program for 20 years. Zip, zero, none, nada. However, they are downsizing store footprint and offering the Best Buy Totaltech™ subscription model for $199.99 so there is some innovation going on … just not the right kind.
Best Buy has done a great job of responding to pandemic-driven demand. They invested wisely in their store fulfillment capabilities and that will continue to pay off in the future. They are also being wise to set clear expectations early that 2022 financials won’t look like 2021. They should continue to chart their own steady course in 2022 and continue to improve on their already admirable digital agility.