The end of a boom in personal-computer sales is landing on Best Buy Inc.’s financial statements.
The electronics retailer warned investors Wednesday afternoon that it will not hit financial targets for the company’s fiscal second quarter, which ends later this week. Best Buy
executives said they would halt share repurchases and could consider more cost-cutting initiatives, though they remain committed to paying dividends.
“As we’ve said, we entered the year expecting our fiscal 2023 financial results to be softer than last year as we lap government stimulus support and unusually strong consumer electronics industry demand while we continue to invest in our future,” Chief Executive Corie Barry said in a statement. “As high inflation has continued and consumer sentiment has deteriorated, customer demand within the consumer electronics industry has softened even further, leading to Q2 financial results below the expectations we shared in May.”
Personal computers saw a boom in purchases in the first two years of the COVID-19 pandemic, but sales and shipments of PCs reportedly dove harder than they have in years in the second quarter, as roaring inflation forced consumers to focus on essentials. Demand for other products that Best Buy sells have also shown weakness, such as large appliances — appliance maker Whirlpool Corp.
cut its annual guidance and noted soft demand earlier this week.
For more: The pandemic PC boom is over, but its legacy will live on
Best Buy is the second major retail chain to cut its guidance this week, after Walmart Inc.
warned about inflation taking a bite out of its customers. Other retail chains had already started slashing guidance in the previous earnings season, when Best Buy also trimmed its annual guidance.
Two months ago, Best Buy executives told investors that they expected the second quarter to play out like the first quarter, when comparable sales declined 8% year-over-year, and cut their full-year outlook to a comparable-sales decline of 3% to 6%. On Wednesday, however, they said to expect a second-quarter decline of about 13%, and a full-year drop of about 11%, while admitting that little is certain about the second half of 2022.
“As we contemplate the back half of the year, based on the ongoing uncertainty as it relates to macroeconomic conditions and consumer electronics demand, it is difficult to assess the duration of the softer sales environment and the impact on our business,” Chief Financial Officer Matt Bilunas said in a statement.
Executives suggested more cost-cutting by stating, “in response to the current sales environment, the company will continue to actively assess further actions to manage profitability,” adding that stock buybacks would be “paused” though the dividend remains in effect.
Best Buy shares fell 2.3% in after-hours trading following the announcement, after closing with a 3.4% gain at $74.49. The stock has declined 26.7% so far this year, as the S&P 500 index
has dropped 17.7%.