Best Buy on Black Friday in Maryland
By Savyata Mishra
(Reuters) – Best Buy posted a smaller drop in fourth-quarter sales than expected and beat profit estimates on Thursday, benefiting from holiday deals for big-ticket purchases and growth in paid memberships.
Shares of the top U.S. electronics retailer rose 5% as it forecast a recovery in comparable sales in the back half of 2024 and said it would cut some roles without giving more details.
The company is taking steps to “right-size parts of the business where we expect to see lower volume…whether that is the result of lower industry sales or due to decisions in…paid memberships,” CEO Corie Barry said.
With subscription tiers of $179.99 per year and $49.99 per year, the membership plan led to better services margin rates, helping quarterly gross profit rate rise to 20.5% from 20% a year ago.
CFO Matt Bilunas expects memberships to help expand the rate by about 20 to 30 basis points in fiscal 2025, while anticipating a start to upgrades and replacements for the gadgets bought early in the pandemic.
“Paid members consistently showed higher levels of interaction with comparatively higher levels of spend at Best Buy and a shift of spend away from competitors,” Barry said.
Consumers, however, remained cautious as higher borrowing costs force them to make trade-off decisions to cover for household essentials.
Best Buy forecast an annual drop in comparable sales of as much as 3% compared to market expectation of a 0.23% rise, indicating a third straight year of decline.
“Excitement around AI-enabled products have investors looking at FY25 as the likely bottom of the industry’s sales pressure,” John Tomlinson, a senior analyst at M Science said.
Best Buy earned $2.72 per share in the fourth quarter, compared to LSEG estimates of $2.52. Its comparable sales fell 4.8%, its ninth straight quarterly decline, compared to expectation of a 5.36% drop.
(Reporting by Savyata Mishra in Bengaluru; Editing by Arun Koyyur)
