What happened
Best Buy (BBY -0.11%) stock outperformed the market this week by rising 15% compared to a 0.5% drop in the S&P 500 through Thursday trading, according to data provided by S&P Global Market Intelligence. The retailer announced holiday season earnings results that showed stress on the business from supply chain challenges. That bad news was outweighed by a bright long-term forecast for sales and cash returns.
So what
Best Buy's comparable-store sales fell 2% through the holiday season quarter. That result put the chain at the low end of the outlook that management had issued back in late November.
However, investors still considered it a success considering the company had to reduce some store hours due to surging COVID-19 cases. CEO Corie Barry and her team also cited "constrained inventory" as a key pressure on sales through January.
Image source: Getty Images.
Now what
Despite those challenges, investors were happy to hear the details of management's growth and cash return outlooks. Best Buy should post only modest sales declines in each of the next two years as the over 15% gains since 2019 reverse slightly. Profitability will have a soft landing, too, edging down to about 5.4% of sales this year compared to 6% in 2021.
Best Buy believes it will return to setting sales records by fiscal 2025. The long-term growth outlook is brightening, management says, as tech products are becoming a larger priority for most consumers.
In the meantime, executives plan to spend aggressively on growth initiatives like the e-commerce sales channel, tele-health, and its membership program so that the chain can capitalize on what's expected to be stable, strong demand in niches like home entertainment, remote work, fitness, virtual reality, and smart home devices.
