Best Buy’s Q1 Sales Dip Due to Consumer Spending Cutbacks

Best Buy Stock

Best Buy (NYSE:BBY) continues to grapple with sluggish sales as consumer demand wanes following a surge during the pandemic.

The electronics retailer unveiled mixed fiscal first-quarter results for 2025 on Thursday before the market opened. While adjusted earnings per share exceeded estimates at $1.20, net sales fell to $8.85 billion from $9.47 billion a year ago and below the anticipated $8.97 billion for the quarter.

CEO Corie Barry noted on a media call with Yahoo Finance that consumer behavior remains “uneven,” with a focus on necessities like food, fuel, and lodging.

In the US, Best Buy saw a total sales decline of 6.3%, led by significant drops in appliances (down 18.5%), entertainment (down 11.3%), and consumer electronics (down 8.3%). However, computing and mobile phones experienced a smaller decline of 2.2%, outperforming expectations of a 4.17% drop, while international sales dipped 3.3%.

Online sales also decreased by 6.1% in the quarter, accounting for 30.8% of total US revenue, slightly higher than the 30.5% from a year earlier.

The company’s service category, including its membership offerings, contributed to improved profitability in the US during Q1, according to Barry.

Domestic gross profit rate increased to 23.4% from 22.6% the previous year. However, the company incurred $15 million in restructuring charges due to severance, with Barry highlighting workforce restructuring efforts aimed at enhancing frontline support while streamlining leadership layers.

Best Buy reiterated its guidance for overall sales to decline between 3% and 0% for the fiscal year.

Despite concerns about discretionary spending and uncertainty regarding the replacement cycle, the company’s stock surged more than 11% on Thursday morning following the earnings report. Analysts like Steven Zaccone from Citi anticipate this increase due to improved profitability.

Looking ahead, concerns persist about the appliance category’s weakness and potential market share pressures from competitors like Costco. However, Barry expressed optimism about the potential for AI innovation to stimulate the replacement cycle, citing products like AI-focused PCs and Samsung’s AI-enabled phones.

While preorders for AI laptops are exceeding early expectations, Barry acknowledged that overall numbers remain modest as consumers prefer to research and see the products in person. The HP EliteBook Ultra AI PC is set to debut on June 18.

Analysts such as Joe Feldman from Telsey Advisory Group anticipate more momentum as new technology enters the market for the back-to-school season, while Jonathan Matuszewski at Jefferies sees the replacement cycle gaining traction, particularly in consumer electronics, gaming consoles, and home theater systems.

Here’s the breakdown of Best Buy’s earnings compared to Wall Street estimates:

  • Adjusted EPS: $1.20 versus $1.08
  • Net Sales: $8.85 billion versus $8.97 billion
  • Total US sales: -6.30% versus -5.02%
  • Appliances: -18.50% versus -9.92%
  • Entertainment: -11.30% versus -2%
  • Consumer electronics: -8.30% versus -6%
  • Computing and mobile phones: -2.20% versus -4.17%
  • International: -3.30% versus -3%

The company also provided a revenue outlook for the year, expected to range between $41.3 billion and $42.6 billion, with Q2 same-store sales projected to decline by roughly 3%.

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