Best Buy, the latest retailer to lower its sales forecast for the months ahead, now anticipates a 13% drop in the coming quarter. But it’s optimistic about what comes afterward -- including the prospects for its first-ever small-format, digital-first store.
“As high inflation has continued and consumer sentiment has deteriorated, customer demand within the consumer electronics industry has softened,” says Corie Barry, Best Buy’s CEO, in its announcement.
Still, the company points out, its lower forecast is still 7.5% higher than it was in the comparable period of its fiscal 2020 before the pandemic hit.
“We remain a strong, profitable company with a unique position in an extremely innovative, vibrant industry that is more relevant than ever in the lives of consumers,” she says.
Best Buy also spilled the details of its new concept, testing in the Charlotte, North Carolina, market. The stores are tiny, compared to its traditional fleet, at about 5,000 square feet. They offer a curated selection of products sold in a digital-first format that encourages customers to shop, select and get advice digitally while in the store.
The new stores offer in-store pick-up, pick-up lockers outside the store, and around-the-clock options.
And while they won’t carry large items, such as appliances, they will offer pick-up of such items when digitally ordered.
Seven-foot welcome screens instruct shoppers how to navigate and scan the QR codes throughout the store.
Best Buy's lower forecast, however, hit investors like a mighty Minnesota Uff-da.
It joins retailers like Walmart, Target, Kohl’s and Gap that say while inflation may be adding froth to some of their numbers, the reality is that consumers are cutting back.
“Best Buy is acutely sensitive to deteriorating consumer demand,” writes Sean Dunlop, an equity analyst who follows the company for Morningstar, “with consumer electronics and appliances historically representing two of the first places consumers look to pull back on spending.”
“Household finances are constrained,” writes Neil Saunders, managing director of GlobalData, in his reaction to the news. “The economic outlook is uncertain. And people have gone back to entertaining themselves outside of the home. Demand for electronics has fallen back sharply, and Best Buy has come down to earth with a bump.”