US retail industry continues to face headwinds! Best Buy lowers Q2 and full-year profit forecasts

It is learned that following Walmart and Target, Best Buy, another US retail giant, announced a reduction in its profit forecast on July 27. It is reported that Best Buy lowered its performance forecast for the fiscal year and the second quarter due to weak consumer demand for electronic products.

Best Buy said it expects same-store sales to fall about 11% in the 12 months ending in January, compared with a May forecast of a decline of between 3% and 6%. In the second quarter, same-store sales are expected to fall about 13%, compared with a May forecast of an 8% decline.

Best Buy said it would suspend stock buybacks but would continue to pay a quarterly dividend. It also said in a press release that it "continues to actively evaluate further actions to manage profitability."

Best Buy is the latest U.S. retailer to cut its profit forecast after Walmart cut its profit forecast on Monday, sending a slump in retail stocks.

Target also cut its profit margin forecast twice, first in May and then in June, saying it would take aggressive steps to remove excess inventory ahead of the critical back-to-school and holiday seasons.

However, Best Buy said its inventory levels at the end of the second quarter will be roughly flat compared with the same period last year, a stark difference from Walmart, Target and Gap, where excess inventory can hurt profit margins.

Best Buy has cut its earnings forecast twice, the last time in May, as consumers with stimulus money and unusually high demand for new laptops, home theater equipment and kitchen appliances during the pandemic.

"As high inflation persisted and consumer confidence deteriorated, customer demand in the consumer electronics industry softened further, resulting in second quarter financial results below the expectations we shared in May," Best Buy CEO Corie Barry said in the release.

However, Barry added that its sales were still higher than before the pandemic, highlighting the company's strong position even in turbulent times.

The company has been looking for new growth opportunities, such as adding items such as fitness equipment, electric bikes and high-tech beauty products, and launching Totaltech, a subscription plan that includes benefits such as technical support and extended warranties.

Editor✎ Ashley/

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