Best Buy slumps despite topping estimates

CEO laments ‘traumatising’ effect of organised crime

Best Buy saw its stock price slump on Tuesday, despite the US electronics retailer topping third quarter estimates. 

3rd quarter

In the three months up to 30 October, the firm generated earnings per share of $2.08 from revenue of $11.91bn (£8.91bn), instead of the EPS of $1.91 from revenue of $11.58bn that analysts polled by Refinitiv had expected. 

The firm continued to benefit from the increased expenditure of American consumers on home electronics such as kitchen appliances, smartphones and home theatre equipment seen since the start of the Covid-19 crisis. 

Net sales rose by $60m from the third quarter of 2020 to $11.91bn, beating forecasts of $11.58bn. 

Same-store sales rose by 22.6% year-on-year and 2% on a quarterly basis, beating the company’s own expectations. 

Organised crime

A certain kind of increased footfall however, may have contributed to the company’s stock sinking on Tuesday, namely those of criminals. 

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Chief executive officer Corie Barry said: “We are seeing more and more particularly organised retail crime. You can see that pressure in our financials, and more importantly, frankly, you can see that pressure with our associates. It’s traumatising.”

According to the National Retail Federation, organised crime costs US retailers $720,000 for every $1bn in sales on average. 

Investors also reacted to the company missing margin expectations. Best Buy’s gross margin fell from 23.5% to 0.1%, missing the 23.6% average that analysts polled by Bloomberg had forecast. 

Chief financial officer Matt Bilunas did not provide an outlook for next year but stated he expects the company to offer deeper discounts in the coming quarters, adding: “Clearly, as inventory becomes more free, you could imagine that promotionality is going to start to increase in categories more than one at a time as we get into next year.”

By 13:20 pm EDT (UTC-5), Best Buy traded down by 13.7% at $119, up by 19% since the start of the year. 

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