By By Juveria Tabassum
(Reuters) -Best Buy trimmed its annual profit and sales forecasts on Tuesday, signaling a muted holiday shopping season amid sluggish demand for pricey electronics such as televisions and home theater systems.
Its shares were down 3% before the bell as the company also reported a much bigger-than-expected drop in comparable sales in the third quarter.
“We expected lower demand between sales events, but the impact was steeper than expected,” CEO Corie Barry said on a post-earnings call, echoing Target (NYSE:TGT) executives’ comments that the response to promotions this year was stronger than earlier.
Third-quarter comparable sales in the U.S. declined 2.8%, compared with analysts’ estimate of a 0.85% fall.
Despite easing inflationary pressures, customers have remained cautious about spending on big-ticket electronics, apparel, and home furnishings, and have preferred to wait instead for promotional events.
That countered the lift from upgrade of gadgets with generative artificial intelligence technology, such as Apple (NASDAQ:AAPL)’s iPhone or Microsoft (NASDAQ:MSFT)’s CoPilot+ powered laptops.
Best Buy (NYSE:BBY)’s annual outlook cut, just ahead of the Thanksgiving shopping event that encompasses Black Friday and Cyber Monday, adds to rising expectations of an uneven holiday season.
On the other hand, deep-pocketed retailers such as Amazon (NASDAQ:AMZN) and Walmart (NYSE:WMT) have been more optimistic, with the latter lifting its annual targets and forecasting more demand from upper-income households.
Best Buy now expects annual comparable sales to decline between 2.5% and 3.5%, compared with its earlier forecast of a decline between 1.5% and 3%, while it also trimmed the upper end of its adjusted profit per share target.
Third-quarter profit per share of $1.26 also missed expectations of $1.29, according to data compiled by LSEG.
The results suggest that the quarter was more challenging than previously anticipated, Truist Securities analyst Scot Ciccarelli said, pointing to Best Buy’s history of driving better-than-guided margins.