(Bloomberg Opinion) -- Best Buy Co. Inc.’s post-pandemic slowdown has officially begun. And unfortunately for its investors, there are clear signs the electronics retailer’s troubles might just be getting started.
Early Tuesday, the company reported revenue of $11.91 billion for the quarter ended in October, slightly above the $11.69 billion median estimate of analysts surveyed by Bloomberg, and roughly flat compared with last year. Revenue growth was markedly lower than the 36% and 20% rates Best Buy had in its first and second quarters, respectively.
But what rattled Wall Street was the retailer’s soft holiday sales outlook. Best Buy forecast revenue of between $16.4 billion and $16.9 billion for the current quarter, which at the low end would be a significant disappointment. In addition, management warned more promotional activity and increased store theft was pressuring profitability. The retailer’s shares tumbled more than 15% after the results were announced.
The numbers signal that we shouldn’t expect a return to higher levels of growth anytime soon. That’s largely due to the nature of what Best Buy sells. Unlike recurring spending categories such as clothing and food, the retailer’s product mix is dominated by large, one-time purchases of televisions, smartphones, personal computers and appliances, all things that don’t need to be replaced annually. After a year in which consumers spent aggressively to build out their in-home digital entertainment systems and remote-work setups, it seems likely that demand was pulled forward and that PC shoppers have what they need for now.
There are signs of further weakness ahead. According to market research firm TrendForce, industry shipments for televisions are expected to drop 10% in the December holiday quarter. And PC growth has been tumbling, with the latest report from research firm IDC showing just a 4% rise in the third quarter after climbing as much as 55% earlier this year. And that’s on the heels of a drop in computer sales in the October quarter.
This column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.
Tae Kim is a Bloomberg Opinion columnist covering technology. He previously covered technology for Barron's, following an earlier career as an equity analyst.
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