Employees bring a television to Steve Steward’s car at a Best Buy store on Black Friday, traditionally one of the busiest shopping days of the year. The crowds are smaller this year due to the growing popularity of online shopping amid concerns about the COVID-19 pandemic.
Paul Hennessy | SOPA images | LightRocket | Getty Images
Best Buy said on Thursday that it is preparing for a challenging dynamic in the coming months: rivals slashing prices to try to keep sales momentum while the pandemic wind subsides.
Chief Financial Officer Matt Bilunas said the company expected sales to increase in the first quarter, but said profits could be hurt. Like Best Buy, he said, some other retailers will be compared to large numbers because of their significant gains during the global health crisis.
“We anticipate more promotional pressure than we experienced last year, as inventory becomes more available and competition is likely to increase,” he said in a call with investors and analysts.
Best Buy is among the retailers that saw sales grow as people were stuck at home during the global health crisis. After being forced to work and learn at home, many consumers had to rush to buy new computer monitors, printers and other tools. When they started cooking more, they also tried to update their appliances, while others opted for video games to pass the time. With higher demand and lower inventory, retailers like Best Buy have seen items fly off the shelves – even without poking customers with tempting selling prices.
The pandemic-driven demand started at Best Buy and other large stores like Walmart and Target in the first quarter of last year, when people faced orders to stay home and started stocking up on what they needed, from groceries to technology equipment.
Sales growth accelerated at Best Buy in the following months, as the global health crisis intensified and consumers’ time at home extended. For Best Buy, sales growth peaked in the third fiscal quarter, which ended on October 31, with sales online and in stores open at least 14 months up 23%.
Target also benefited, as its doors remained open during the spring blockades – with strong sales of consumer electronics and less merchandise ending up in the settlement rack. Its chief financial officer, Michael Fiddelke, said on the phone with investors and analysts that the discount company “sold an above-average combination of our units at a regular price”. He said he reduced the number of promotions to avoid increasing the number of out-of-stock customers faced.
Best Buy exceeded Wall Street’s earnings expectations for the fourth quarter, but the slowdown in sales led to a liquidation on Thursday. The shares fell more than 8% on Thursday morning.
The big retailer said it would face another headwind, mainly with people’s return to pre-pandemic consumption habits in autumn and winter. Bilunas said it expects same-store sales to drop by up to 2% or grow by up to 1% in the fiscal year, as consumers invest their money in dinners or vacations, rather than buying a new laptop or home theater.