Best Buy (NYSE: BBY) revenues for its first quarter (fiscal year 2023) fell 8.7% to $9.89 billion, but the softness was not unexpected and Wall Street reacted favorably to the results with the company’s stock price up slightly.
The Richfield, Minn.-based retail giant reports it had comparable sales declines across almost all categories, with the largest drivers on a weighted basis being computing and home theater. Meanwhile, Best Buy’s revenues online fell 14.9% versus last year, which again is not surprising since last year was still driven by at-home pandemic buying.
Domestic online revenue of $3.06 billion decreased 14.9% on a comparable basis. Total U.S. online revenue accounted for 30.9% of all buying, down from 33.2% last year.
Like almost every business facing increased costs for labor and supply chain, Best Buy’s overall gross profit rate took a hit. The profit rate was 21.9% in Q1 2022 versus 23.3% last year.
The lower gross profit rate was primarily due to lower services margin rates, including pressure associated with the $199 Best Buy Totaltech membership offering; lower product margin rates, including increased promotions; and higher supply chain costs. These pressures were partially offset by higher profit-sharing revenue from the company’s private label and co-branded credit card arrangement.
“I am incredibly proud of our teams’ ability to develop and execute plans to adapt to the changing environment over the past two years and to the more recent macro-economic conditions,” says Corie Barry, Best Buy CEO.
“Even with the expected slowdown this year, we continue to be in a fundamentally stronger position than we were before the pandemic from both a revenue and operating income rate perspective. We are confident in the strength of our business and excited about what lies ahead. We have a unique value creation opportunity and are investing now, as we have successfully invested ahead of change in our past, to ensure we’re ready to meet the needs of our customers and employees and retain our unique position in our industry.”
Barry added that the company expected its financial results to be softer than last year as the government stimulus money stopped, and the industry falls away from “unusually strong demand” over the past 2 years.
“Therefore, the drivers of our Q1 financial results were largely as expected,” continued Barry. “Macro conditions worsened since we provided our guidance in early March which resulted in our sales being slightly lower than our expectations. Those trends have continued into Q2 and, as a result, we are revising our sales and profitability expectations for the year.”
The company updated its full-year 2023 financial guidance to:
- Revenue of $48.3 billion to $49.9 billion, compared to the prior outlook of $49.3 billion to $50.8 billion
- Comparable sales decline of 3.0% to 6.0%, compared to the prior outlook of a decline of 1.0% to 4.0%