Best Buy declares the 'low point' in tech sales after years of declines
- Best Buy's CEO said we're in "the low point in tech demand after two years of sales declines."
- Shoppers are spending more on experiences and preparing for the return of student-loan repayments.
Best Buy says this year will be the "low point" in tech sales before demand bounces back.
"We continue to expect that this year will be the low point in tech demand after two years of sales declines," Best Buy CEO Corie Barry said Tuesday on a call with analysts after the company reported its second-quarter earnings.
Shoppers splurged on tech purchases during the height of the pandemic, and Best Buy has been suffering from a hangover of softer demand since then. It doesn't help that shoppers have shifted spending more toward experiences over products, and many now are preparing to resume student-loan repayments.
"Our industry continues to experience lower consumer demand due to the pandemic pull forward of tech purchases, and the shift back into services spend outside the home like travel and entertainment," Barry said on the call.
Macy's shared similar sentiments last week on consumers' share of spending on experiences and looming student-loan repayments. The department-store chain also said its shoppers' credit-card balances were rising.
Looking ahead to next year, Best Buy is expecting demand to bounce back as shoppers look to upgrade or replace some of their pandemic purchases.
"Overarchingly, we believe that the consumer is in a good place, but as we have said, they are making careful choices and tradeoffs right for their household," Barry said.
Best Buy is already seeing glimmers of stabilization in categories like home theater, executives said on the call.
But first, Best Buy has to get through the rest of this year. The company on Tuesday scaled back its full-year guidance to reflect a slightly more negative outlook.
Best Buy revised the top end of its revenue expectations for the year to $44.5 billion, down from $45.2 billion, and said it expects same-store sales to decline by a range of 4.5% to 6% — revising its previous guidance of 3% to 6%.
For its fiscal second quarter ended July 29, net income fell to $274 million from $306 million a year earlier. Same-store sales, or sales at stores open at least 14 months, declined 6.2% compared to the same period a year ago.
Best Buy rivals like Walmart, Amazon, and Costco that sell a broader range of goods may be able to better weather a cold winter of tech sales, Insider Intelligence senior analyst Zak Stambor wrote Tuesday in a note to clients.
Walmart, for example, has benefited from continued spending on essentials like groceries.
"Best Buy faces a tough environment in which few consumers are looking to splurge on big-ticket items such as home theaters, TVs, and appliances," Stambor wrote. "While our forecast expects overall retail sales to grow 2.9% this year, we project computer and consumer electronics sales to rise just 1.1% as consumers pull back on discretionary spending."