Retailers including Best Buy are facing a cloudy picture heading into the Black Friday weekend, which is considered the start to the holiday shopping season.
The labor market remains strong, consumer spending is strong, and inflation is slowing. But what Americans buy is changing. Credit card fees are rising as the US Federal Reserve steps up efforts to cool the economy, on top of rising costs for food, rent, gasoline and other costs. for the house, dead. Consumers are reluctant to spend money without a purchase, they are more selective in what they buy and, in many cases, trade down to buy something cheaper.
“Across consumers, we’re also seeing savings going down and credit usage going up,” Best Buy CEO Corie Barry said Tuesday. “And value is important to everyone.”
Throughout the third quarter, Best Buy customers are looking for deals, Barry said.
Best Buy’s sales in the depths of the pandemic are due to the large amount of spending by Americans who have invested heavily in gadgets to help them work from home or help their children to virtual learning. Government stimulus checks fueled that spending.
The company acknowledged that 2022 will be a tougher year since its inception and rising inflation has become more difficult as Americans remove items deemed unnecessary from their shopping lists.
The Minneapolis consumer electronics chain earned $277 million, or $1.22 per share in the quarter ended Oct. 29, or $1.38 per share adjusted for restructuring and amortization. It easily beat earnings per share of $1.03 estimated on Wall Street, according to a survey by Zacks Investment Research.
The company took a $26 million cost adjustment as it cut jobs in response to slower spending by Americans.
That’s a significant drop from last year’s revenue of $499 million in the same period.
Sales fell 11% to $10.56 billion, though they missed analyst expectations of $10.31 billion.
Comparable sales— those that come from Best Buy stores and online— were down 10.4%, not as bad as expected.
Barry said during a Tuesday call with industry analysts that sales were down across most product categories. The shortage forced sales of computers and home theaters to slow even as people became more active.
But Barry and other retail executives also expect consumers to return to a more normal holiday pattern, compared to the parts of the pandemic. Best Buy expects more shoppers around the weekend of Black Friday and Cyber Monday, as well as the two weeks leading up to Christmas.
Retailers have been spreading these sales for a long time recently, first for safety reasons, and then because the global chains have been dormant during the pandemic, and they have recovered faster than they should. people thought of it, and there are lots of items in US ports.
Best Buy said that the approach to stores as sales for the year will not be the same as before. Best Buy expects a 10% drop in same-store sales for the year, better than previous forecasts.
Neil Saunders, managing director of GlobalData Retail, said that a double-digit decline in both profits and sales would be alarming but in this case, it was expected. However, according to Saunders, weak hardware sales do not bode well for Black Friday.
“We’re not saying demand will fall, but we do expect it to be easier than ever,” Saunders said.
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