NEW YORK (AP) — Best Buy turned in a first-quarter profit . That beat Wall Street expectations, as the nation’s largest consumer electronics chain continues to struggle with weak consumer demand for gadgets.
But the Minneapolis-based chain predicted. Thursday that the consumer electronics slump will end by . The end of the year as customers who bought gadgets at the start of the pandemic begin to update their devices.
For now, Best Buy reaffirmed its cautious financial outlook, underscoring continued economic uncertainty.
Best Buy’s sales during the depth of the pandemic were fueled by large-scale spending by. Americans who splurged on gadgets to help them work from home or support their children’s virtual education. Government stimulus checks drove much of that spending. But more than a year ago, as consumers became more social, they began to back away from items popular during the pandemic, such as TVs and casual clothing. Then high inflation has also made consumers more choosy about buying gadgets and other items.
“In this environment, consumers are feeling cautious and making tradeoff decisions as . They continue to face high inflation,” Best Buy CEO Cory Barry said.
But the recession should be nearing its end. The pandemic has pushed many people to add more connected devices to their homes and those devices need to be updated or replaced. Barry told analysts on the call that on average, US households now have twice as many connected devices than they did in 2019. , consumers have upgraded or replaced their gadgets every three to seven years, with mobile phones at. The lower end of the spectrum depending on the category, he noted.
Barry noted that customers have already started coming in at higher rates to replenish some gadgets. And he said a return to innovation, a pause during the depths of the pandemic, would help spur a rebound in gadget purchases. He cited items such as the first TVs designed and manufactured by Roku that are available only at Best Buy stores and bestbuy.com.
As consumer spending changes, the company is reducing its workforce. The chain has cut headcount by 20%, or 25,000 people, over the past three years. Much of this has been through isolation. Recently. The company has cut in-store consultants and designers as shoppers move away from physical stores. But it has managed to add another 2 million hours for sales people, he noted.
Best Buy is also rolling out a three-tier membership program next month. with a low-cost option starting at less than $50 per year for different shoppers’ needs.
Best Buy said it earned $244 million, or $1.11 per share, for the three months ended April 30. That compares with $341 million, or $1.49 per share, in the year-ago period. Analysts were expecting $1.10 per share.
Revenue fell 11% to $9.47 billion from $10.65 billion a year earlier. That was below analysts’ expectations of $9.53 billion.
Comparable sales — a key metric of retailer health — were down 10.1% in the quarter.
It projects revenue of $43.8 billion to $45.2 billion for the year. Analysts were expecting $44.5 billion, according to FactSet. It expects comparable sales to decline 3% to 6% for the year.
Shares rose more than 1% to $69.95 in midday trading Thursday.
