Customers will wait outside a Best Buy store in downtown Toronto, Ontario on November 23, 2020 to pick up their online orders.
Geoff Robbins | AFP | Getty Images
Best Buy’s fourth-quarter earnings exceeded Wall Street expectations Thursday, but sales lagged as sales growth slowed compared to earlier months of the pandemic.
The retailer said its sales are likely to slow even further. Chief Financial Officer Matt Bilunas said sales at the same store are expected to range from a 2% decline to a 1% gain this year. The forecast assumes customers will resume or accelerate their spending in areas such as travel and dining out in the second half of the year, he said.
Shares fell more than 7% in premarket trading on the news.
Here’s what the company reported for the fiscal quarter ended January 30 compared to what Wall Street expected, based on an analyst survey by Refinitiv:
- Earnings per share: $ 3.48 adjusted vs. $ 3.45 expected
- Revenue: $ 16.94 billion vs. $ 17.23 billion expected
Best Buy’s fourth quarter net income increased to $ 816 million, or $ 3.10 per share, from $ 745 million, or $ 2.84 per share a year earlier.
Excluding items, it earned $ 3.48 per share, higher than the $ 3.45 per share expected by analysts polled by Refinitiv.
Net sales increased from $ 15.2 billion a year earlier to $ 16.94 billion, but fell short of estimates of $ 17.23 billion.
Sales online and in stores that had been open for at least 14 months grew 12.6%, less than the 14.7% growth analysts expected, according to StreetAccount. That is a sharp drop from the growth rate of 23% in the third quarter.
While it was still going strong, the pace of online sales growth in the US also slowed. It grew 89.3%, compared to 174% in the third quarter and 242% in the second quarter.
The retailer has taken advantage of the stay-at-home restrictions, which have increased the purchase of equipment such as computer monitors for the home office, headphones and laptops for children who go to school remotely, and kitchen equipment to make meal cooking easier.
However, the increasing use of technology has shaken the way people shop. Rather than wandering the store floor, more customers have browsed the website, shipped purchases to their home, or picked them up from the company’s parking lot.
Best Buy estimated that online sales will make up about 40% of total domestic sales in the coming year.
This had consequences for Best Buy’s workforce. The company recently confirmed it is firing an indefinite number of store employees as part of a reorganization.
It also said it plans to spend $ 750 million to $ 850 million on capital expenditures and repurchase at least $ 2 billion in stock. The board of directors approved a 27% increase in the quarterly dividend to 70 cents per share.
As of Wednesday’s close, Best Buy shares are up nearly 33% over the past year. The company’s market value is $ 29.38 billion.
Read the Best Buy press release here.