What happened
Shares of Best Buy (BBY -0.81%) jumped 12.8% on Tuesday after the consumer electronics retailer delivered better-than-expected sales and profits.
So what
Best Buy's revenue fell by 11.1% year over year to $10.6 billion in its fiscal 2023 third quarter ended Oct. 29. The company's comparable-store sales declined by 10.4%, as consumers spent less on computers and home theater equipment after loading up on mobile devices and TVs during the early stages of the pandemic.
Still, Best Buy's sales were better than investors feared. Analysts had expected the retailer to report revenue of $10.3 billion, with a same-store sales decline of 12.9%.
Best Buy was forced to rely more on discounts and other promotions to drive sales, which weighed on its profitability. Its gross and operating margins fell to 22% and 3.4%, respectively, from 23.5% and 5.6% in the year-ago quarter.
Best Buy's adjusted earnings per share, in turn, sank 34% to $1.38. Yet that too was above Wall Street's estimates, which had called for adjusted per-share profits of $1.03.
Now what
Investors were also encouraged by Best Buy's guidance. Management now expects comp sales to decrease by roughly 10%, compared to a prior projection of an 11% decline. Additionally, the company lifted its adjusted operating margin target to above 4%.
Best Buy's guidance boost was a relief to shareholders. Many investors have grown increasingly concerned that inflation and recession fears would force the retailer's customers to slash their spending on technology and other big-ticket purchases. Although this is occurring to some extent, Best Buy is offsetting these lost or delayed sales with new offerings in other popular areas, such as outdoor furniture and appliances.
"While sales are down in our signature categories as we lap the strong growth of the pandemic years, our initiative to expand our presence in adjacent categories is driving sales growth," CEO Corie Barry said during a conference call with analysts.
