Best Buy Misses on Sales and Lowers Guidance. Consumer Demand Is ‘Uneven.’

Same-store sales fell 6.9% this quarter, compared with the 5.7% drop analysts expected.

“BBY’s results were expected to be weak, but these results were more disappointing than expected,” wrote Citi analyst Steven Zaccone in a note Tuesday. Zaccone has a Sell rating on the stock.

Best Buy now sees revenue ranging between $43.1 billion and $43.7 billion for fiscal 2024, while management had predicted a result between $43.8 billion and $44.5 billion. Best Buy also lowered the high end of the range of forecasts it had made for earnings per share. Management is calling for EPS of between $6 and $6.30, compared with $6 to $6.40.

Same-store sales for the full year will fall between 6% and 7.5%, compared with prior guidance for a 4.5% to 6% decline.

Management said fourth-quarter same-store sales will decline by 3% to 7%. Analysts had predicted they would be down by 1.1%.

“In the more recent macro environment, consumer demand has been even more uneven and difficult to predict,” said CEO Corie Barry. “Based on the sales trends in the third quarter and so far in November, we believe it is prudent to lower our annual revenue outlook.”

Shares of Best Buy fell 5.5% to $64.27 in early morning trading. The stock is down 20% this year.

As Barron’s has reported, some analysts believed that Best Buy could start to benefit from people replacing or upgrading their electronics. But Best Buy’s earnings report suggests there is still some way to go before sales tick back up.

Consumers are still preferring to spend on experiences instead of durable goods, Barry said on the call. The company said its discounts this holiday season are going to be bigger than last year’s to stimulate demand.

Another challenge is that there’s “just a bit of a lack of innovation” in the tech space, making consumers less eager to buy, she said.

“The company is in need of improved innovation and new product categories that would drive sales higher over the next few years,” wrote John Tomlinson, global director of research at M Science, in an email to Barron’s.

Still, there are reasons for hope. Best Buy is seeing signs that demand is improving for TVs, computing, and gaming, and there are “a lot of green shoots” in terms of tech innovation that could stimulate demand in 2024, Barry said.

“After two years of declines we believe the consumer electronics industry should see more stabilization next year, and possibly growth in the back half of the year,” she said.

Write to Sabrina Escobar at [email protected]