People walk into a Best Buy store in New York, on Aug. 29, 2023.Spencer Platt/Getty Images
Best Buy BBY-N raised its annual profit forecast on Thursday, as tighter controls on costs help the electronics retailer more than offset the impact from steeper discounts and promotions.
Best Buy’s shares rose 15 per cent after it also reported a smaller-than-expected drop in second-quarter comparable sales and breezed past earnings estimates.
The retailer refreshed its membership program last year and trimmed jobs as part of a restructuring plan, in a bid to help margins amid softer demand at its stores as shoppers deferred spending on pricier electronics.
“We see a consumer who is seeking value and sales events, and one who is also willing to spend on high-price-point products when they need to, or when there is new compelling technology,” Chief Executive Officer Corie Barry said.
The company expects adjusted earnings per share for fiscal year 2025 to be between $6.10 and $6.35, compared with its previous forecast of $5.75 to $6.20.
While overall demand remains soft, shoppers in the United States have looked to upgrade their laptops and tablets during the summer after holding back for several quarters.
Best Buy also benefited from demand for higher-priced artificial intelligence-powered products such as Microsoft’s Copilot+ PCs.
“Back to school is right on pace with how we expected it and that includes the fact that we still think we have some decent volume in front of us,” Barry said on a media call.
Its services business, which provides technical support, installation and repairs, logged an 8.5 per cent rise in domestic comparable sales that helped margins.
Its domestic gross profit rate rose to 23.5 per cent in the second quarter from 23.1 per cent last year.
“While we are encouraged by Best Buy’s improved second-quarter topline performance, demand remains choppy, and consumers are buying on need and value. This is a consistent theme we have seen in retail earnings in Q2,” said M Science analyst John Tomlinson.
Best Buy’s second-quarter comparable sales fell 2.3 per cent versus expectations of a 3.2 per cent drop, according to LSEG data.
Excluding items, Best Buy’s earnings per share of $1.34 beat the average analyst estimate of $1.16.