Best Buy was able to bring in quarterly earnings that went beyond what many analysts had expected on Thursday, however, the company’s quarterly comparable sales are not doing as well. Those numbers are lower than expected, with a very small amount of consumers demanding mobile devices. The company has also brought in low revenue sales from repair services and extended warranties. In addition, notebook computers, televisions, and cameras are also doing poorly industry-wide. Best Buy is the latest retail business that will more than likely have a pretty weak and underwhelming holiday shopping season.
Dow loses 50 points and S&P 500 flat as Match and Square set to IPO today. Best Buy falls 7% after weak outlook. https://t.co/A9OlUXl3FI
— CNNMoney (@CNNMoney) November 19, 2015
Best Buy has been able to pull in some stronger profits as of late in the midst of rebounding revenue as well as cost cuts. On Thursday, the retailer reported earnings of up to $125 million (36 cents a share) in 2015, which is up from the $107 million (30 cents a share) they made the year prior. On the whole, per-share profits did see a rise from 34 cents to 41 cents, which is more than what was predicted by analysts surveyed by Thomson Reuters. But despite that positive development, Best Buy’s third-quarter sales took a 2.4 percent dive, equaling $8.82 billion. This is just under the $8.83 billion average analyst estimate.
Outside of Best Buy, a number of retailers are sending in reports that seem to suggest that consumers are spending more within certain corners of the market while pulling back on their purchases in others. In the third quarter, according to the Wall Street Journal, home improvement stores, such as Lowes and Home Depot, were able to pull in higher sales, while department stores, like Nordstrom’s and Macy’s, saw a pretty sharp decline in their sales. Best Buy witnessed a 4.3 percent decline in sales with their consumer electronic categories in the third quarter, and that downward spiral may continue this quarter. The retail chain predicts sales to dip into the low single digits for the rest of the year. Hubert Joly, Best Buy chairman and CEO, elaborated on the sales decline, as reported by Yahoo Finance.
“We of course recognize that we are up against a strong performance in the fourth quarter of last year and that the NPD industry declines that we saw in the third quarter, both sequentially and year-over-year, may continue throughout this year’s fourth quarter. We have also made incremental investments in services pricing and SG&A that are putting pressure on our fourth quarter earnings outlook. Irrespective, one thing we are certain about is our team’s ability to execute exceptionally well throughout the Holiday. We are going into the Holiday clear on our priorities and our plan, and with a better trained, engaged and most importantly, highly determined team. I am grateful for what they have accomplished so far this year and extremely proud of their capabilities and passion to win.”
— CNET (@CNET) November 19, 2015
New investments in services like Geek Squad could damage the gross profit. Joly went on to say that the benefits of investing in services had begun coming in and would start to be more visible over the next several quarters. If sales numbers continue to be poor during this holiday season, Joly suggests that other retail stores may just start creating more discounts in the beginning of next year, although Best Buy would not be in line to follow that trend. Best Buy seems to be decently stocked for the holidays, according to Joly, and could replenish stock in a quick manner.
[Photo by Aaron P. Bernstein/Getty Images]