NEW YORK — Best Buy turned in a first-quarter profit that beat Wall Street expectations, while the nation’s largest consumer electronics chain continued to wrestle with weak consumer demand for gadgets.
But the Minneapolis-based chain predicted on Thursday that the slump in consumer electronics will bottom out by year-end as customers who bought gadgets at the onset of the pandemic will start to update their devices.
For now, Best Buy reaffirmed its cautious financial outlook, underscoring continued economic uncertainty.
Best Buy’s sales during the depths of the pandemic were fueled by oversized spending by Americans who splurged on gadgets to help them work from home or help their children with virtual learning. Government stimulus checks drove a lot of that spending. But more than a year ago, consumers began to pull back from items that were popular during the pandemic like TVs and casual clothing as they became more social. Then stubbornly high inflation has also made shoppers more selective about buying gadgets and other items.
“In this environment, customers are clearly feeling cautious and making tradeoff decisions as they continue to deal with high inflation,” said Best Buy CEO Corie Barry.
But the slump should be nearing the end. The pandemic pushed many people to add more connected devices into their homes, and those devices will need to be updated or replaced. Barry told analysts on the call that on average, U.S. households now have twice as many connected devices as they did in 2019. Historically, customers upgrade or replace their gadgets every three to seven years, depending on the category with mobile phones on the lower end of the spectrum, she noted.
Barry noted that customers are already starting to come in at a higher rate to replenish some of the gadgets. And she said a return to innovation, on pause during the depths of the pandemic, should help spur a rebound in gadget buying. She cited some items like the first-ever TVs to be designed and made by Roku that are available exclusively at Best Buy stores and on bestbuy.com.
As consumer spending shifts, the company has been paring down its labor force; the chain has reduced overall headcount by 20% or 25,000 people, over the past three years. Most of it has been through attrition. Recently, the company laid off in-store consultants and designers as shoppers move away from the physical stores, but it was able to add 2 million more hours for sales people, she noted.
Best Buy is also rolling out a three-tiered membership program next month, including a lower-price option costing less than $50 per year, tailored to the different needs of shoppers.
Best Buy said that it earned $244 million, or $1.11 per share, for the three-month period ended April 30. That compares with $341 million, or $1.49 per share, in the year-ago period. Analysts were expecting $1.10 per share.
Revenue slipped 11% to $9.47 billion from $10.65 billion in the year-ago period. That was below analysts expectation for $9.53 billion.
Comparable sales — a key metric of a retailer’s health — were down 10.1% in the quarter.
Best Buy said it expects earnings per share in the range of $5.70 to $6.50 for the year. Analysts expect $6.17 per share, according to FactSet.
It projects revenue of $43.8 billion to $45.2 billion for the year. Analysts expect $44.5 billion, according to FactSet. It also anticipates comparable sales to fall 3% to 6% for the year.
Shares rose more than 1% to $69.95 in midday trading on Thursday.
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