Electronics retailer Best Buy on Thursday delivered a sales outlook that missed analysts’ expectations, citing “uncertainty” related to consumer behaviour and the impact of recent tariffs.
Best Buy narrowed its forecast for comparable sales growth in the fiscal year to February 1, 2020 and now predicts an increase of 0.7 per cent to 1.7 per cent. That compared to its previous guidance of between 0.5 to 2.5 per cent and was below analysts’ median forecast of 2.1 per cent, according to Refinitiv.
The Minneapolis-based company projects revenues of between $43.1bn to $43.6bn, compared with its previous expectations of between $42.9bn and $43.9bn.
The updated outlook reflects the impact from the recent tariff increases announced by Washington amid its trade war with Beijing. Earlier this month, Donald Trump said he will raise existing tariffs on $250bn worth of Chinese imports from 25 per cent to 30 per cent on October 1, and raise tariffs on $300bn of Chinese goods, due to start on September 1, from 10 per cent to 15 per cent.
Shares in the company fell more than 9 per cent in morning trading in New York, but they were up 30 per cent year-to-date as of Wednesday’s close.
Best Buy boosted its outlook for adjusted earnings and now expects to report between $5.60 to $5.75 a share, up from $5.45 to $5.65 a share previously.
The changes to the outlook also reflect “general uncertainty related to overall customer buying behaviour in the back half of the year” and its stronger than expected first-half earnings, the company said.
The results signal a difficult start for Corie Barry who succeeded Hubert Joly as chief executive in June and raises pressure ahead of the key holiday shopping season. Mr Joly stepped down after a nearly seven-year run during which he helped the company return to growth amid stiff competition from Amazon.
The softer outlook accompanied disappointing second quarter like-for-like sales of 1.6 per cent, that missed analyst expectations for a 2.1 per cent increase, according to a Refinitv survey of Wall Street analysts. However, that did follow on a strong 6.2 per cent increase in the year ago quarter.
In the second quarter, overall revenues climbed 1.7 per cent to $9.54bn, just shy of analysts’ estimates.
Domestic revenues climbed 2.1 per cent from a year ago and were partially boosted by the acquisition of GreatCall and offset by store closures. Meanwhile, overseas revenues slid 3.4 per cent from a year ago, reflecting weakness in Canada and the impact of foreign exchange rates.
Net income fell to $238m or 89 cents a share in the three months ended August 3, down from to $244m or 86 cents a share in the year ago quarter. However, adjusted earnings of $1.08 a share, topped analyst expectations for 99 cents a share.
“We also delivered improved profitability driven by gross profit rate expansion and continued disciplined expense management, demonstrating the culture we have built around driving cost reductions and efficiencies to help fund investments,” Ms Barry said.
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