Best Buy set for tenth straight quarter of sales drop on weak electronics spending

By Ananya Mariam Rajesh and Juveria Tabassum

Best Buy (NYSE:) is set to post its tenth consecutive quarter of sales decline on Thursday when the U.S. electronics retailer reports quarterly results, as spending on big-ticket electronics remains pressured despite easing inflation.

Although results from big-box retailers Walmart (NYSE:) and Target indicate that consumers have resumed spending on less-expensive discretionary items such as apparel and accessories, they are still hesitant to go for TVs and washing machines.

“I don’t think there’s any change in demand trends for electronics. I don’t expect this to be a very big quarter for (Best Buy),” Telsey Advisory Group analyst Joseph Feldman said.

He said a recovery in demand at Best Buy is not expected until the second half of this year.

THE CONTEXT

In April, U.S. consumer prices rose less than expected, indicating that inflation had resumed its downward trend at the start of the second quarter, which means price pressures are expected to ebb further in the quarter.

Best Buy was one of the first among top U.S. retailers to see a slump in demand when inflation hit decades high in 2022 and customers cut back on big-ticket expenses.

Those looking to buy a high-end flatscreen TV in the current market have to shell out anywhere between $1,099.99 and $5,799.99, and about $1,499.98 for a smart front-load washing machine.    

Analysts have also said that the rise of artificial intelligence may have delayed purchases as some higher-income shoppers await upgraded laptops with AI features, such as Microsoft (NASDAQ:)’s co-pilot button, and televisions to hit the shelves.

Wedbush analyst Seth Basham noted that Best Buy was poised to gain market share as a replacement-and-innovation cycle takes hold.    

THE FUNDAMENTALS

** Best Buy’s first-quarter revenue is expected to drop 5.4% to $8.96 billion from a year earlier, per LSEG data, while comparable sales are expected to fall 4.94%.

** Analysts on average expect Best Buy’s adjusted earnings to fall 6.4% to $1.08 per share from a year earlier.

** The company will report results before markets open on May 30.   

WALL STREET SENTIMENT

** At least four brokerages have cut price targets or lowered their rating on Best Buy since April 1.

** The current average rating of 28 analysts on Best Buy’s stock is “hold”, with seven analysts rating it “buy” or higher and 19 “hold”.

** So far this year, Best Buy’s stock has fallen 7.3%