Best Buy on Tuesday predicted a lesser decline in yearly sales than it had previously anticipated, citing its confidence that an increase in Christmas bargains and discounts will attract more inflation-weary customers.
The retailer’s stock climbed 11% to $79.06 as it also surpassed quarterly profit projections and announced the resumption of its share repurchase program.
This year, escalating costs have reduced demand for non-essential items, compelling Best Buy and other retailers to provide discounts and promotions to clear inventories of televisions, laptops, and other devices.
Best Buy anticipates a 10% decline in comparable sales for the year ending in January, compared to an earlier prediction of an 11% decline.
Along with stores such as Target and Macy’s, the business anticipates that Americans would delay their end-of-year holiday gift buying as late as possible in order to find the greatest discounts.
In previous years, holiday shopping was spread out over three months, but this year it will be concentrated during Black Friday week, Cyber Monday, and the two weeks leading up to December 25, according to Best Buy CEO Corie Barry, who added that the retailer is timing discounts accordingly to better manage inventory levels.
Best Buy may be better positioned than other shops for the holiday season, according to Jason Benowitz, senior portfolio manager at Roosevelt Investment Group.
Benowitz continued, “We anticipate modest growth in consumer holiday spending this year and feel that many firms keep too much inventory relative to demand, whereas Best Buy appears to have adjusted its holdings in advance of the holiday season.”
However, larger reductions will have a negative impact on profit margins over the Christmas quarter, Best Buy cautioned.
The firm earned $1.38 per share on an adjusted basis for the third quarter, above analysts’ projections of $1.03 per share, according to IBES data from Refinitiv.