Best Buy Boosts Forecast on ‘Extraordinarily High’ Demand
(Bloomberg) -- Best Buy Co. boosted its full-year sales forecast after revenue soared in the first quarter, fueled by what it deemed “extraordinarily high” demand for its electronics that has continued even as the pandemic wanes. The shares rose.
The big-box retailer said it now sees company-wide comparable sales rising between 3% and 6% this fiscal year. It had earlier expected them to land somewhere between a 2% decline and a 1% gain. U.S. same-store sales in the quarter topped the estimate compiled by Bloomberg.
Best Buy sales surged during the early stages of lockdowns as Americans built their at-home workstations for remote work and school. There was some question whether those sales gains would hold, now that all the extra monitors and keyboards are already in place, but the results show demand for video games, appliances and other items to improve home life have stayed elevated.
“Best Buy has started its year on an incredibly strong note,” said Neil Saunders, an analyst at GlobalData. Given that demand for electronics was softening slightly at the end of last year, this is a remarkable result.”
The shares rose 3.8% at 9:33 a.m. in New York trading. The stock had increased 17% this year before Thursday, compared with the 12% gain for the benchmark S&P 500 Index.
The company also raised its expectations for gross profit, which should approximately match last year’s rate after earlier expecting that measure to narrow. Chief Financial Officer Matt Bilunas said the year “has clearly started out much stronger than we originally anticipated,” with momentum carrying into the current quarter.
U.S. sales rose by double-digit percentages in all product categories, the company said. It had an easy comparison with last year, when it closed its stores in late March and shifted to curbside pickup.
Adjusted earnings per share topped expectations, too. Last year’s profits were boosted by a reduction in markdowns, which may resume this year, but the worsening shortage of semiconductors could limit inventory and thus rein in discounting.
The company expects inventory constraints will continue through the end of the year due to strong demand, supply-chain bottlenecks and chip shortages. It is seeing some price increases in the appliance category due to higher input costs, Chief Executive Officer Corie Barry said on a call with media.
Online sales rose just 7.6% in its home market, after e-commerce revenue had more than doubled in the year-ago period with many stores shut. Like its fellow Minneapolis retailer Target Corp., Best Buy aims to fulfill most digital orders from the available inventory in its physical stores.
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