Shoppers shop at a Best Buy store on August 24, 2021 in Chicago, Illinois.
Scott Olson | Getty Images
Best Buy on Wednesday cut its forecast for the year and second quarter, saying that demand for consumer electronics has declined amid inflation.
The consumer electronics retailer said it now expects same-store sales to decline by about 13% in the second quarter. This is lower than it was announced in May, when it was forecast to be roughly in line with the first quarter, when it fell 8%.
For the fiscal year, Best Buy said it expects same-store sales to decline by about 11%, compared with a 3% to 6% drop that was forecast in May.
Best Buy said it would suspend share repurchases but continue to pay quarterly dividends. The press release also states that it “will continue to actively evaluate further profitability management actions.” The company did not immediately respond to a request for details about these possible steps.
With Wednesday’s announcement, Best Buy joins a growing list of retailers including Gap, Adidas, Kolya, Target as well as walmart which warn of declining sales or profits as consumers feel hurt by inflation or reallocate spending on services such as travel and restaurants rather than goods.
However, Best Buy said its inventory levels at the end of the second quarter would remain roughly the same as last year. This is a notable difference from Walmart, Target, and Gap, where excess inventory affects profit margins.
Best Buy already expected its sales to decline as consumers had stimulus dollars and unusually large appetites for new laptops, home theater equipment and kitchen appliances during the pandemic. He had has already lowered its forecast in May.
At the time, CEO Corey Barry said consumers were “retreating at a faster and deeper pace than we originally thought” as they spent money on entertainment or became more frugal as food and gas prices rose.
On Wednesday, Barry said the economic backdrop has become more complex.
“As high inflation persists and consumer sentiment continues to deteriorate, consumer demand in the consumer electronics industry has declined further, resulting in second-quarter financial results below expectations we shared in May,” she said in a press release.
At the same time, she added that her sales are higher than before the pandemic, highlighting the company’s strong position even in turbulent times.
The company has been looking for new growth opportunities, such as adding products such as exercise equipment, electric bikes and high-tech beauty gadgets, and launching Totaltech, a subscription program that includes perks such as tech support and extended warranties.
Best Buy’s announcement comes after walmart cents retail turmoil Monday when the big box hippo cut your profit forecasts. Walmart also said consumers are missing out on higher-margin discretionary items as they have to pay more for food and gas. However, the company raised its sales forecast, saying that customers are turning to its stores for inexpensive products.
Target twice lowered the profitability forecast, the first time in May and then in Junesaying it will take aggressive steps to get rid of unwanted items ahead of the crucial school and holiday seasons, including canceling orders and offering deep discounts.
Best Buy’s shares fell about 2% after hours. The company will report its second quarter results in August. thirty.
This story is evolving. Please stay tuned for updates.