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Big CE Retailer Slashes Forecasts As Inflation Issue Hurt Sales

In what could be a looming problem for CE and appliance retailers in Australia as the biggest CE retailer in the world cut its profit and sales outlook as inflation issues kicks in.

Best Buy claims that inflation that yesterday hit 6.1% in Australia is pummelling consumers and eroding demand for electronics and nonessential appliances.

Operating income will only be about 4% of revenue in the current fiscal year based on “current planning assumptions,” Best Buy said in a statement this morning.

The retailer who is trialling a new in store look that is similar to the Apple store look (see separate story here) claims sales are tipped to tumble 11%, versus an earlier forecast that they would fall no more than 6%.

The AFR reports that Phillip Hudak of fund managers Maple-Brown Abbott is steering clear of Australia’s retail sector, warning that companies sitting on elevated inventories may be forced to discount to move products as inflation at a 20-year high dogs the consumer sector.

As households feel the pinch from rising prices on basics such as food and petrol, the small caps manager is concerned about the demand outlook for selling discretionary consumer electronics and appliances.

The dour short-term assessment contrasts sharply with the upgraded fiscal 2025 outlook Best Buy unveiled in March, when it outlined expected gains from its membership program, remodelled stores and new services in health care and digital advertising.

While those goals aren’t out of reach, the company faces a harder slog this year.

“As high inflation has continued and consumer sentiment has deteriorated, customer demand within the consumer electronics industry has softened even further,” Best Buy Chief Executive Officer Corie Barry said in the statement.

Best Buy shares fell 2.3% in late trading paring much of their sharp decline immediately after the announcement.

Best Buy is down 27% this year, while in Australia Harvey Norman shares are down 19% and JB Hi Fi 11.6% year to date, Myer is beating the downward trend up 7.6% YTD.

Analysts are currently tipping “increased promotional activity” by consumer electronics and appliance retailers in Australia.

“It is difficult to assess the duration of the softer sales environment and the impact on our business,” Chief Financial Officer Matt Bilunas said.

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