Best Buy (NYSE: BBY) is reporting a bit of a mixed bag for its fiscal year 2022 third-quarter ending October 30, 2021. In the U.S., the company saw 2% sales growth to $10.985 billion, while internationally its sales fell 7% to $925 million. Overall, the company had 1/2% growth for the quarter. Meanwhile, the company cited price pressures on its TotalTech membership as one reason for lower profit margins. Best Buy’s stock fell 14% in pre-market trading following the announcement.
The increase was primarily driven by comparable sales growth of 2.0%, which was partially offset by the loss of revenue from permanent store closures in the past year. From a merchandising perspective, the largest drivers of comparable sales growth on a weighted basis were appliances, home theater and mobile phones. These positive drivers were partially offset by a decline in computing.
Online revenues represented 31.3% of sales, down from 35.2% last year in the midst of the pandemic. The company’s domestic gross profit rate was 23.4% versus 24.0% last year. According to Best Buy, the gross profit rate decrease was primarily due to:
- Lower product margin rates, which were driven by lapping low levels of promotions, product damages and returns last year, as well as increased inventory shrink
- Lower services margin rates, which included rate pressure associated with the company’s new Totaltech membership offering.
“We delivered record Q3 results, including 2% domestic comparable sales on top of 22.6% last year, as our leaders continued to drive new ways of operating and our employees continued to do amazing things to support our customer’s technology needs in knowledgeable, fast and convenient ways,” says Corie Barry, Best Buy CEO. “Our omnichannel capabilities and our ability to inspire and support across all of technology in a way no one else can means we are uniquely positioned to seize the opportunity in this environment and in the future.”
“More people continue to sustainably work, entertain, cook and connect at home, and while customers are returning to stores, digital sales were still more than double pre-pandemic levels, and phone, chat and in-home sales continued to grow,” Barry continues. “During the third quarter, we reached our fastest small-package online shipping times ever as our same-day delivery was up 400% and we nearly doubled the percent of products delivered within one day compared to last year.”
“We are looking forward to a strong holiday season and believe we are extremely well-positioned with both the tech customers want and fast and convenient ways to get it,” says Matt Bilunas, Best Buy CFO. “We are committed to driving initiatives that will deliver future growth and our Q4 outlook reflects continued investments in our new membership program, technology, advertising and our health strategy.”
For the full fiscal year 2022, the company’s outlook is revenue between $51.8 billion and $52.3 billion, which is an overall growth rate between 10.5% and 11.5%. Heading into Q4, the company predicts revenues between $16.4 billion and $16.9 billion.