NEW YORK (AP) — Best Buy, the nation’s largest consumer electronics chain, reported another quarterly drop in sales as Americans continued to tighten their purse strings on appliances and gadgets to focus on essentials.
The Richfield, Minnesota-based retailer lowered its annual sales and profit outlook. Best Buy’s CEO Corie Barry also warned that shoppers will likely have to pay more for purchases reflecting higher costs as President-elect Donald Trump pledges to impose sweeping tariffs on products from China and Mexico.
Meanwhile, Kohl's posted third-quarter results that showed a deepening slump and forecast that sales declines for the year will be worse than expected. The results came one day after the Menomonee Falls, Wisconsin-based retailer announced that Michaels CEO and retail veteran Ashley Buchanan will take over its top job, effective Jan. 15.
Best Buy's shares were down nearly 8% in afternoon trading, while Kohl's shares plummeted nearly 19%.
As the last batch of major retailers report third-quarter earnings results this week, winners and losers are emerging at the approach of Black Friday, the official start of the holiday shopping season.
Macy’s reported on Monday stronger-than-expected sales for the third quarter, and said it’s delaying the release of its full quarterly results, set for Tuesday, after it discovered an employee intentionally hid up to $154 million of expenses over several years.
Walmart, the nation's largest retailer, last week reported another quarter of stellar sales as its low price model proved a powerful draw for inflationary-weary shoppers. But Target, whose business relies on discretionary purchases like clothing and accessories, reported sluggish sales and slumping profits in the fiscal third quarter as customers curtailed their spending on non-essentials.
During a call with analysts Tuesday, Best Buy's Barry said the chain wrestled with economic uncertainty, shoppers' waiting for deals and the disruption during the run-up to the election, particularly in non-essential categories. Sales are rebounding, but Barry noted that the season will be very promotional.
Best Buy kicked off Black Friday sales on Nov. 21, a week earlier than last year. It's also bringing back doorbusters — limited-time-only deals on specific products — every Friday from Nov. 8 through Dec. 20 online, in the store and on the app.
“We are managing well what we can control in what remains a volatile environment,” Barry said on the call.
Like other retailers, Best Buy is also bracing for Trump's threat to impose sweeping new tariffs on Mexico, Canada and China as soon as he takes office as part of his effort to crack down on illegal immigration and drugs.
Barry said the company believes that diversification of sourcing in consumer electronics is a “good thing but it’s also very hard to do.” The supply network is complex as well as the fabrication plants for consumer gadgets, she said.
Moreover, Best Buy has very little control of sourcing, directly importing only about 2% to 3% of its cost of goods sold, she said. The majority of that has been moved out of China.
But Barry says the retailer is reliant on its vendors and estimates that 60% of the company’s cost of goods sold come from China. The second-largest importing country is Mexico.
Best Buy has a team looking at how tariffs will impact its business, but she said that the retailer operates on very thin profit margins. So while vendors and the company will shoulder some costs, Best Buy will have to pass on much of the higher costs of the tariffs to its customers in the form of higher prices.
“These are goods that people need, and higher prices are not helpful,” Barry said.
Best Buy earned $273 million, or $1.26 per share, for the quarter ended Nov. 2. That compares with $263 million, or $1.21 per share, a year ago. Sales fell to $9.45 billion from $9.76 billion in the year-ago quarter. Analysts expected earnings of $1.30 per share on sales of $9.63 billion, according to FactSet.
Comparable sales — those sales from online channels and physical stores — fell 2.9% in the quarter.
The company said that sales of appliances, home theater and gaming declined. That was partially offset by growth in the computing, tablets and services categories.
Best Buy now expects annual sales in the range of $41.1 billion to $41.5 billion, down from prior guidance of $41.3 billion to $41.9 billion. Analysts anticipated $41.54 billion, according to FactSet analysts.
It now expects earnings per share to be in the range of $6.10 to $6.25, which compares to prior guidance of $6.10 to $6.35. Analysts expected $6.26 per share.
Kohl's reported earnings of $22 million, or 20 cents per share, in the quarter ended Nov. 2. That compares with $59 million, or 53 cents per share, in the year-ago period. Sales dropped to $3.51 billion from $3.84 billion. Analysts expected earnings of 28 cents on sales of $3.63 billion.
For the year, Kohl's expects comparable sales to decline 6% to 7% and anticipates net sales to fall 7% to 8%. The company expects annual earnings per share between $1.20 and $1.50, compared with the average Street estimate of $1.78 per share.