As retailers and suppliers sweat on Black Friday sales with some concerned over the impact of inflation, US retailer Best Buy has delivered a surprising result that saw their shares soar the most in more than two years.
The retailer’s shares jumped 11% to US$79.06, after it beat quarterly profit estimates.
Surging prices have driven down demand for non-essential products this year, forcing Best Buy to opt for discounts and promotions to clear stocks of products including televisions, laptops, and other electronics.
This is exactly what the likes of The Good Guys, JB Hi Fi and Harvey Norman have been doing in recent weeks ahead of this week’s Black Friday sales.
Best Buy expects full-year comparable sales to fall about 10% for the year ending in January 2023.
Adjusted operating income this year will be “slightly higher” than the previous forecast of 4% of sales, the consumer-electronics retailer said overnight.
Bloomberg claims the surprisingly upbeat report “suggests that the worst of the sales declines may be behind the company,” Scot Ciccarelli, an analyst at Truist Securities, said in a report.
Declining inventories also “should imply less markdown risk/pressure for the holiday selling season.”
The improved outlook bolsters confidence in Best Buy’s ability to navigate waning US demand for televisions, computers, and appliances amid soaring inflation.
Best Buy stopped short of issuing an improved outlook for the holiday season, leaving its expectations for the current quarter unchanged.
It also struck a cautious tone on pricing, saying the promotional environment remains “considerably more intense” than last year, when retailers struggled to stock their stores amid supply-chain snarls.
The company attributed the improved annual profit forecast to better-than-expected results in the third quarter as it made progress in controlling costs. Adjusted earnings fell to $1.38 a share in the fiscal third quarter, compared with the $1.05 average of analyst estimates compiled by Bloomberg. Sales slid 11% to $10.6 billion. Analysts had predicted $10.3 billion.
Comparable sales are now expected to fall only 10% this year, Best Buy said, slightly better than the previous forecast of an 11% decline.
The outlook “may leave room for the electronics retailer to surprise again in 4Q, as guidance suggests only a slight improvement in same-store sales declines despite easier year-over-year comparisons,” Bloomberg Intelligence analyst Lindsay Dutch said.
