There will be lots of deals this holiday shopping season, Best Buy’s CEO says
Best Buy Co. Chief Executive Corie Barry has some good news for U.S. consumers grappling with high inflation: Holiday deals are coming back.
Discounting at Best Buy was deeper than expected during the second quarter as the company was forced to mark down items to match other retailers, Barry said Tuesday. Promotions are poised to last through November and December.
That contrasts with the previous two years, when product shortages prompted shoppers to grab what they could before supplies ran out, with less regard to prices.
“This holiday pattern will be a little more like holidays prior to the pandemic,” Barry said on a call with reporters after the electronics retailer reported second-quarter financial results showing profit and sales declined but still beat analysts’ expectations. “We’re seeing a very value-oriented consumer.”
Driving the promotions are bloated stockpiles of goods at rival retailers, Barry said. As other retailers discounted heavily, Best Buy also cut prices.
Target is canceling orders from suppliers, particularly for home goods and clothing, and it’s slashing prices further to clear out amassed inventory ahead of the crucial fall and holiday shopping seasons.
Although Best Buy’s inventory fell 5.8% from last year during the three months that ended in late July, Target Corp.’s surged 36%. Walmart Inc. posted a 25% jump and warned earlier this month that electronic goods were ripe for markdowns.
“What makes the current environment the most volatile that I’ve seen is the quantity of inventory at other retailers,” Barry said.
Price cuts and falling demand for discretionary items are hurting Best Buy, which slashed its profit outlook a month ago. In the second quarter, revenue tumbled 13% and sales at stores open at least a year dropped 12%, dragged down by waning demand for computers and home theaters.
Shoppers are trading down in categories such as televisions, shying away from the most tricked-out models even as they continue buying big sets, Barry said.
There’s less leeway for trade-downs in mobile phones, an encouraging sign for Apple Inc., which is expected to introduce the iPhone 14 next month. And Best Buy continues to see strong demand for video games, Barry said.
Best Buy surpassed Wall Street’s profit estimate after warning a month ago that it was under pressure from waning consumer-electronics demand.
Adjusted earnings fell to $1.54 a share in the fiscal second quarter, which ended in late July, Best Buy said in a statement Tuesday. That exceeded the $1.35 average of analyst estimates compiled by Bloomberg, which had come down sharply since the company cut its forecast for the year in late July.
Second-quarter sales tumbled 13% to $10.3 billion, matching analyst estimates. Net income fell to $306 million, down from $734 million a year earlier.
Best Buy shares closed at $74.89, up 1.6%.
