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Oct. Sales Down 15%

Home Theater, Computing Drive 10% Q3 Comp Sales Decline at Best Buy

Computer and home theater categories led comparable sales declines in Q3 FY ’23 at Best Buy, said CEO Corie Barry on a Tuesday earnings call. Comp sales fell 10.4% year on year in the quarter ending Oct. 29 but were higher than guidance. Shares closed 12.8% higher Tuesday at $79.88.

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For Q4, Best Buy expects a 10% comp sales decline, said Chief Financial Officer Matt Bilunas. He cited more sales events this year vs. 2021 as supply chain shortages eased and consumers did less early shopping to be sure they could secure the items they wanted. October sales were down about 15% year on year, and similar trends played out to start November, he said. “The holiday is quite different” than it has been in recent quarters, he said.

Computing sales were up 23% over Q3 2020, said Bilunas. “We’re still seeing very strong growth from the pre-pandemic period,” he said, noting a “normalization” of trends after a big increase in the installed base of computers from COVID-19 lockdowns.

Promotional activity that was “largely absent during much of the pandemic, has returned,” said Barry. On whether Best Buy plans to react or lead with promotions over the remainder of the holiday season, Barry said it makes “targeted decisions” about how and when to be promotional. That includes not going “toe to toe” with the same items other retailers mark down, she said. Best Buy will “pivot” as necessary and hit promotional prices “that make sense,” she said.

Average selling prices (ASPs) for TVs were down “a little bit” in Q3, Bilunas said, but the company is seeing a good mix into higher priced models. ASPs were higher than 2020, and management believes they will remain higher, Barry said, citing a category mix skewing to premium appliances and large TVs with higher prices. Best Buy hasn’t seen a difference in demographics among shoppers, though some consumers scaled back spending in the current economic environment, she said.

Best Buy has completed 42 store remodels, Barry said, saying the new 35,000-square-foot stores highlight broader assortments including outdoor furniture and health and wellness. The new stores also include premium home theater and appliances, more space for consultation and services and expanded fulfillment capabilities: larger warehouses, in-store and curbside pickup and “24/7” lockers. They also include updated vendor experiences, Barry said.

Totaltech memberships underperformed expectations in the year since the program launched, Barry said, declining to provide numbers. She attributed softer demand for the program to the “uniqueness” of the $199-per-year membership, the macroeconomic environment and declining product sales. Best Buy updated its in-store point-of-sale tools to showcase the value of Totaltech to potential new members, she said.

A new guided selling experience, Solution Sidekick, shows employees customers’ profiles in an app in real time, including past purchases and active memberships. As the employee starts an order, the app shows savings the customer can get with a Totaltech membership and recommends more solutions, Barry said. The employee can send a recap of the conversation and suggestions to the customer, “so they can purchase later at their convenience,” she said.

Merchandise inventory of $7.3 billion fell 14.7% from the year-ago quarter. That was driven by sales declines and the timing of inventory receipts that reflected last year’s inventory build due to the uncertain supply chain environment and a “phasing” of holiday sales, the company said.

Commenting on the Upgrade+ program Best Buy implemented in October for Apple Mac computers, Bilunas said some customers are moving to some of the latest products vs. shopping opening price points. The program is still new but is off to a “good start,” he said.