(Bloomberg) -- Best Buy Co. cut its full-year guidance on sluggish demand for electronics and appliances, a sign of trouble for the retailer looking to pull off a turnaround.
Though shoppers are responding to holiday promotions, “there are potential low points between the sales events, particularly in December,” Chief Financial Officer Matt Bilunas said on a call with analysts.
The company said it now expects comparable sales to decline in a range of 2.5% to 3.5%, versus the previous guidance of a decline of 1.5% to 3%.
“During the second half of the quarter, ongoing macro uncertainty, customers waiting for deals and sales events, and distraction during the run-up to the election” kept shoppers on the sideline, said Chief Executive Officer Corie Barry in a statement. Demand has increased now that holiday sales have begun and the election is over, she said. Barry added they are balancing optimism with “likely uneven customer behavior going forward.”
Revenue is now forecast to reach as much as $41.5 billion, down from as high as $41.9 billion. The company also trimmed the upper end of its guidance for adjusted earnings per share. Best Buy had raised its full-year earnings guidance in August.
The shares fell as much as 9.9% in Tuesday trading in New York, the biggest intraday drop in more than two years. The stock has gained 19% for the year to date through Monday while the S&P 500 index is up 26% for the period.
Best Buy has been working to return to sales growth after a pandemic boom when consumers upgraded their home offices with new laptops and other electronics. Shoppers started pulling back in late 2021 due to high inflation and interest rates, hurting the company’s sales.
Best Buy and other retailers are going into the important holiday season faced with selective, value-seeking consumers. The company says it has just launched a section on its website for clearance and refurbished products that has been attracting customers.
Walmart Inc. and Target Corp. said they have experienced a strong start to the holiday season, though their performance has varied. Walmart lifted its full-year forecast last week as it continues to gain share, especially among higher-income consumers. Target slashed its guidance, citing weak discretionary spending.
To drive up demand, Best Buy is betting on new products like artificial-intelligence computers. Still, the company is prepared for “likely uneven customer behavior going forward,” Barry said.
This quarter extended the narrative of growing tablet and computer sales even as gaming products, appliances and other items likely remain in the negative. Third-quarter adjusted earnings per share missed Bloomberg estimates of $1.29. Enterprise comparable sales and revenue also fell short of expectations for the period.
Tariffs
Best Buy is already planning for the impact of tariffs and working with vendors, Barry said on the analyst call.
“There’s very little in the consumer electronic space that is not imported. Almost everything is imported,” she said. The company has moved most of the manufacturing for the products it controls out of China, she added.
While some of the cost of tariffs will be paid by vendors, “we see that the customer ends up bearing some of the cost of the tariffs,” which the company has seen before, Barry said.
“The level of proposed tariffs and more precarious financial position of consumers makes the company more vulnerable this time,” wrote Wedbush analysts Seth Basham and Matthew McCartney in a note to investors.
--With assistance from Matt Townsend.
(Adds commentary from the earnings call and analyst commentary. Updates shares.)
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