Best Buy executives on Thursday said consumers remained cautious in Q1, helping send enterprise revenue down 11.1% year over year to $9.5 billion. Domestic revenue fell 11% to $8.8 billion, with comps down 10.4%. Domestic online revenue fell 12.1% to $2.69 billion and was 30.5% of sales, versus 30.9% last year.
Revenue declines were driven by slower computer, appliance, home theater and mobile phone sales. Gaming and services revenue grew, according to a company press release. Net earnings fell 28.4% to $244 million.
The company’s previously announced store fleet changes are on track, including closing 20 to 30 large format stores, remodeling eight stores and opening around 10 outlet stores, CEO Corie Barry told analysts.
Best Buy is scrambling to safeguard its bottom line amid tepid demand for electronics. In Q1 the retailer was forced to be “slightly more promotional than last year,” and in some products and categories, even more than expected, Barry said.
“In this environment, customers are clearly feeling cautious and making tradeoff decisions as they continue to deal with high inflation and low consumer confidence due to a number of factors,” she said.
Insider Intelligence analysts led by Zak Stambor estimate that overall retail sales will grow 3.3% this year while the computer and consumer electronics category will grow just 2.5%. Demand for these goods had ballooned during the height of the pandemic, and has since corrected, per that report.
“Given its tough position, Best Buy needs to continue to protect its bottom line by executing well on fundamentals such as inventory management and upselling consumers on its membership program,” Stambor said in emailed comments. “Those factors helped it grow its domestic gross profit rate amid a challenging period.”
Barry touted changes to its membership tiers, unveiled earlier this month, and said the company expects its membership program to contribute about 25 basis points of enterprise year-over-year operating income rate expansion in fiscal 2024. More broadly, business will get easier after this year, she said.
“We continue to believe that calendar 2023 will be the bottom for the decline in tech demand,” she said. “This year we are focused on delivering great customer experiences while running the business efficiently and strategically setting ourselves up to flourish when the industry returns to growth.”
GlobalData Managing Director Neil Saunders similarly said that, while “the electronics sector is firmly in recession and will remain so for most of the year ahead,” declines should moderate throughout the year. In the meantime, however, Best Buy is likely to close more stores and find other efficiencies, and work to glean revenue from its membership program.
“While the current slump is only temporary, it will drive longer term changes in Best Buy’s approach to retailing,” he said in emailed comments.