Employees bring a television to Steve Steward’s car at a Best Buy store on Black Friday, traditionally one of the busiest shopping days of the year. The crowds are smaller this year due to the increasing popularity of online shopping amid concerns about the COVID-19 pandemic.
Paul Hennessy | SOPA images | LightRocket | Getty Images
Best Buy said on Thursday that it is bracing for a challenging dynamic in the coming months: rivals are cutting prices to try to hold on to selling momentum as the pandemic tailwind abates.
Chief Financial Officer Matt Bilunas said the company expects higher sales in the first quarter, but said earnings could be squeezed. Like Best Buy, he said, some other retailers will be compared to large numbers because of their significant gains during the global health crisis.
“We expect more promotional pressure than we have seen in the past year as inventory becomes more available and competition is likely to increase,” he said during a phone call to investors and analysts.
Best Buy is one of the retailers that saw sales grow when people were locked at home during the global health crisis. After working and learning from home, many consumers had to rush to buy new computer screens, printers, and other tools. As they started cooking more, they also looked to upgrading appliances, while others turned to video games to pass the time. With higher demand and lower inventory, retailers like Best Buy saw items fly off the shelves – without even nudging shoppers with enticing selling prices.
Pandemic-driven demand started at Best Buy and other big-box stores such as Walmart and Target in the first quarter of last year when people started dealing with stay-at-home orders and stocking up with what they needed, from groceries to tech equipment .
Sales growth at Best Buy accelerated in the following months as the global health crisis intensified and consumer time at home extended. For Best Buy, revenue growth peaked in the fiscal third quarter, which ended October 31, as sales grew 23% online and in stores that were open for at least 14 months.
Target also took advantage of the fact that the doors remained open during the spring lockdowns – with strong consumer electronics sales and fewer goods hitting the clean-up rack. Chief Financial Officer Michael Fiddelke said on call to investors and analysts that the discounter has “sold an above-average mix of our units at regular price”. He said it reduced the number of promotions to avoid increasing out-of-stock customers.
Best Buy surpassed Wall Street’s fourth-quarter earnings expectations, but slowing sales led to a sell-off on Thursday. Shares fell more than 8% on Thursday morning.
The big-box retailer said it will face headwinds again, especially as people revert to pre-pandemic spending habits in the fall and winter. Bilunas said it expects sales in the same store to fall by as much as 2% or grow by up to 1% for the fiscal year as consumers spend their money on eating out or on vacation instead of a new laptop or home theater to buy.