Best Buy Co. Inc. (NYSE: BBY) dropped over 1.08% in pre trading session on Wednesday as the firm anticipated a lower decline in yearly sales than it had anticipated, expressing confidence that an increase in sales incentives will attract more inflation-weary customers during the holiday shopping season.
As shares of the retailer jumped over 12.71% to close at $79.88 after it said it has restarted its share buyback program and surpassed expectations for its quarterly earnings.
This year, the demand for non-essential goods has decreased due to rising prices, forcing Best Buy and other retailers to use discounts and promotions to move out their remaining inventory of items like televisions, laptops, and other electronics.
Comparable sales for the entire year are expected to decline by roughly 10% at Best Buy, down from an earlier prediction of a decline of nearly 11%. In order to get the lowest prices, the firm, along with other retailers like Target Corp. and Macy’s Inc., anticipates that Americans would put off buying their end-of-year Christmas gifts until the very last minute.
Best Buy Chief Executive Officer Corie Barry said that unlike previous years when holiday shopping was spread across three months, this year’s shopping activity will be concentrated during Black Friday week, Cyber Monday, and the two weeks leading up to Dec. 25. She also said that the retailer was timing discounts accordingly to better manage inventory levels.
In comparison to other stores, Best Buy may be better prepared for the holiday season, according to Jason Benowitz, senior portfolio manager at Roosevelt Investment Group.
Benowitz continued, “We anticipate modest growth in consumer holiday spending this year and think many firms keep too much inventory in comparison to demand, whereas Best Buy looks to have rightsized its inventories in advance of the season.
However, Best Buy cautioned that steeper reductions might hurt holiday-quarter profit margins.
According to IBES data from Refinitiv, the company earned $1.38 per share on an adjusted basis in the third quarter, surpassing analysts’ predictions of $1.03 per share.
Best Buy CEO Corie Barry stated;
“I am pleased of our team’s performance and their unwavering focus on providing outstanding service to our customers amid what is clearly a hard situation for our business.” We remained dedicated to balancing our near-term reaction to the present environment, managing effectively what is under our control, while also advancing our strategic ambitions and making investments in key areas for our long-term growth throughout the quarter. As a result, we outperformed our pre-quarter expectations for Q3 results.”