Customers wait outside a Best Buy store in downtown Toronto, Ontario on November 23, 2020 to collect their online orders.
Geoff Robbins | AFP | Getty Images
Best Buy’s fourth quarter earnings surpassed Wall Street’s expectations on Thursday, but lagged behind sales as sales growth slowed compared to previous months of the pandemic.
The retailer said its sales are likely to slow even further. CFO Matt Bilunas said sales in the same store are projected to drop from 2% to 1% this year. The forecast assumes customers will resume or accelerate their spending in areas like travel and dining in the second half of the year, he said.
Shares fell nearly 6% on the news early Thursday.
The company reported for the fiscal quarter ended January 30, versus Wall Street’s expectations, based on an analyst survey by Refinitiv:
- Earnings per share: $ 3.48 adjusted versus $ 3.45 expected
- Revenue: $ 16.94 billion versus $ 17.23 billion expected
Best Buy’s net income rose from $ 745 million, or $ 2.84 per share last year, to $ 816 million, or $ 3.10 per share.
Excluding items, the company earned $ 3.48 per share, above what Refinitiv polled analysts expected to earn $ 3.45 per share.
Net sales rose to $ 16.94 billion from $ 15.2 billion a year ago, but fell short of estimates of $ 17.23 billion.
Sales on the Internet and in stores that have been open for at least 14 months rose 12.6%, below the 14.7% growth forecast by analysts, according to StreetAccount. This is a sharp drop from the 23% growth rate in the third quarter.
Although still strong, the pace of online sales growth also slowed in the US. It grew 89.3% from 174% in the third quarter and 242% in the second quarter.
The retailer benefited from the stay-at-home restrictions that spurred purchases of equipment such as computer monitors for the home office, headphones and laptops for remote children to attend school, and kitchen appliances to make it easier to cook meals.
However, the rapid adoption of technology has rocked the way people shop. Instead of walking around the store, more customers have browsed the website, sent purchases home, or retrieved them in the company’s parking lot.
Best Buy estimates that online sales will account for around 40% of total domestic sales in the coming year.
This had an impact on Best Buy’s workforce. Corie Barry, CEO of Best Buy, said the company started with 123,000 employees last fiscal year and ended the year with around 102,000 – a decrease of around 21,000, or 17%. She said most of the reduced headcount came from attrition. Earlier this month, she said the company laid off about 5,000 employees, most of whom were full-time employees.
She said the company is determined to retrain and retrain employees as it makes organizational changes geared towards e-commerce. For example, some stores are testing a design that reduces the size of the retail space and takes up more space to fulfill online orders.
“Like many retailers, we believe that much of what we’ve seen over the past year will be permanent,” she said. “Our people and branches will always be at the heart of our strategy. We are just looking at how we can best use our team and physical assets to meet customer expectations and needs.”
Best Buy plans to spend $ 750 million to $ 850 million on investments and buy back at least $ 2 billion in shares. The board of directors approved an increase in the quarterly dividend by 27% to 70 cents per share.
At the close of trading on Wednesday, Best Buy shares were up nearly 33% last year. The company’s market value is $ 29.38 billion.
Read the Best Buy press release here.