Best Buy hikes sales forecast as shoppers upgrade tech, splurge on devices

Best Buy hiked its full-year forecast Tuesday, as it topped Wall Street’s quarterly sales expectations and customers turned to the retailer to upgrade tech devices and splurge on new computers, gaming consoles and smartphones.

The consumer electronics retailer said it now expects revenue of between $41.65 billion to $41.95 billion for the full year, higher than its previous range of $41.1 billion to $41.9 billion. It expects adjusted earnings per share of $6.25 to $6.35, compared with its prior range of $6.15 to $6.30.

Best Buy said it expects full-year comparable sales, a metric that tracks sales online and at stores open at least 14 months, to range between a 0.5% rise to a 1.2% increase, compared with its previous expectations for a 1% decline and a 1% climb.

On the company’s earnings call, CEO Corie Barry said Best Buy saw “better-than-expected” sales in the quarter because of strong results across computing, gaming and mobile phones, as well as growth in wearables and headphones. She said sales rose across both its website and stores.

She said customer shopping behavior in the most recent three-month period was about the same as what Best Buy has seen for the past several quarters.

“Customers remain resilient, but deal focused and attracted to more predictable sales moments,” such as back-to-school sales and Best Buy’s October sale that coincided with Amazon’s Prime Day event, she said.

And she said, “while customers continued to be thoughtful about big ticket purchases in the current environment, they are willing to spend on high priced point products when they need to or when there is technology innovation.”

Here’s how the retailer did for the three-month period that ended Nov. 1 compared with what Wall Street was expecting, according to a survey of analysts by LSEG:

• Earnings per share: $1.40 adjusted vs. $1.31 expected
• Revenue: $9.67 billion vs. $9.59 billion expected

Best Buy has been waiting for some of the key catalysts that tend to drive its business, such as higher housing turnover that leads to appliance purchases, the tech innovations that spark demand for devices and expert advice, and the increased willingness by inflation-weary consumers to splurge on discretionary items.

Some of that tech innovation appears to be gaining momentum with sales of the Nintendo Switch 2, new iPhones and AI-enabled laptops. The company called out those merchandise categories as strengths in the most recent three-month period.

Best Buy’s net income for the fiscal third quarter fell to $140 million, or 66 cents per share, from net income of $273 million, or $1.26 per share, in the year-ago period. Adjusting for one-time items, including stock-based compensation and restructuring charges, Best Buy reported earnings of $1.40.

Revenue rose from $9.45 billion in the year-ago quarter.

Best Buy’s comparable sales increased 2.7% year over year. In the U.S., the metric jumped 2.4%, as shoppers bought computers, gaming systems and mobile phones, but purchased fewer appliances and home theaters.

Best Buy’s annual revenue has dropped for the past three years. With the updated guidance, the company expects annual revenue to be slightly higher than last year’s total of $41.53 billion.

At Best Buy’s stores, the company has tried to give customers more reasons to try products by adding more vendor demos, Barry said. For example, she said more than 50 of its locations have immersive showcase areas for Meta’s latest AI-enabled glasses, and demand for in-person demos has outpaced available appointments.

It has launched most of its pilot showrooms with Ikea, which it is testing in 10 stores across Texas and Florida. And other vendors, including Breville and Sharkninja, are also showing off items for home baristas and chefs or customers looking for health and beauty devices in its stores, she said.

Barry said “very early reads are positive and we are excited to monitor customer response during the holidays.”

To help drive growth, Best Buy also launched a third-party marketplace in mid-August to expand the brands and the items that it sells. About three months into the launch, the company has more than 1,000 sellers and 11 times more individual items available for online customers than it did before, Barry said on the earnings call.

So far, she said the company is seeing higher sales in categories like accessories and small appliances. She said customer return rates for marketplace items have run lower than first-party purchases, and more than 80% of marketplace product returns by customers have been at stores.

As the marketplace grows, she said it’s driving higher profits and creating new opportunities for Best Buy to sell online ads.

Despite the positive signs, some of Best Buy’s categories, including appliances, continue to lag.

Chief Financial Officer Matt Bilunas said the appliance category is “probably the most difficult one that we have in the market today.” He said historically, the company has sold new premium appliances and sets of appliances.

Now, he said the company is seeing more shoppers replace a product that’s broken rather than buy a washer and dryer pair, and promotions haven’t been as effective. To speed up sales, Best Buy plans to increase its labor in the department, speed up deliveries to better compete with rivals and even make some items available same day, he said.

“And hopefully as housing and different things change, then the market starts to swing back to something that might be a little bit more normal,” he said.

As of Monday’s close, shares of Best Buy have dropped by about 12% so far this year. That compares with the 14% gains of the S&P 500 during the same period.