Best Buy's profit in Q2 was cut in half! Sales of most categories dropped sharply! Q3 outlook is not optimistic!

It is learned that Best Buy released its Q2 financial report as of July 30 on August 30. High inflation and weak consumer demand caused Best Buy's sales in the Q2 quarter to drop by 13%. CEO Corie Barry said that the global economic environment has become more turbulent, so promotional activities have been increased amid weak sales. The following are the highlights of the Q2 financial report:

• Revenue: $10.33 billion, beating estimates of $10.24 billion

• Net profit fell to $306 million from $734 million a year ago.

• EPS: Adjusted $1.54, beating estimates of $1.27

Sales in most categories declined in the second quarter, with computers and home theater experiencing the largest declines. Demand for smartphones and computer hardware remained high.

Changing consumption trends

Best Buy’s quarterly earnings report reflects a dramatic shift in consumer spending habits. A year ago, the retailer’s sales grew nearly 20% as shoppers snapped up TVs, laptops and other items. Now, as people return to the office or travel, some consumers are skipping high-priced discretionary items and spending more on essentials.

Best Buy has noticed that some shoppers are trying to stretch their spending budgets, especially those in lower-income households, who are turning to lower-priced TVs or spending more on promotions. High inflation seems to be a glut of goods across the industry, and Walmart and Target have lowered their full-year profit forecasts as they have had to slash prices to try to clear out large inventories.

Reducing inventory margins remains a challenge

In response, Best Buy said it has closely managed its merchandise to ensure that there is no excess inventory. At the end of the second quarter, inventory was down 6% from the same period last year, but up about 16% from the same period in 2019. Even with low inventory levels, Best Buy's profits are still under pressure as competitors discount a large number of products through more promotions.

With weak sales, Best Buy has stopped buying back shares. Currently, the department is still in the process of restructuring, which also includes inevitable layoffs. Best Buy said it has spent $34 million on restructuring, most of which is used for severance benefits, and it expects to increase spending in the future, but it did not disclose whether it would lay off more employees.

Sales will continue to decline in Q3 and 2022

As of the close of trading on August 29, Best Buy's stock price has fallen 27% this year, with a market value of approximately $16.6 billion. Best Buy lowered its sales and profit forecasts for 2022 at the end of July, predicting that demand for consumer electronics will weaken as grocery and fuel costs rise. Sales are expected to fall by about 11% in 2022. Best Buy Chief Financial Officer Matt Bilunas expects sales in the third quarter to fall sharply, even more than in the second quarter.

Editor ✎Estella/

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