Best Buy Co. Inc. raised its full-year earnings forecast on Tuesday, as the largest U.S. consumer tech retailer sold more mobile phones and home-theatre systems, but stayed cautious on its outlook for the holiday shopping season.
Shares in Best Buy bounced back by midday and closed up more than 2 per cent following a rocky start in premarket trading after its holiday-quarter earnings forecast fell largely short of Wall Street estimates.
Besides introducing features on its website and mobile app geared to younger customers, Best Buy is touting its tech support and advice to win shoppers deserting malls for Amazon and other online stores.
The company began a US$199-per-year “Total Tech Support” program in May, which includes unlimited “Geek Squad” support online and in stores.
Best Buy’s U.S. same-store sales climbed 4.3 per cent in the third quarter ended Nov. 3, topping analysts’ expectations of a 3.7-per-cent increase, according to IBES data from Refinitiv.
Its overall earnings and revenue also topped Wall Street expectations.
“Senior management [at Best Buy] deserves significant credit for successfully reconfiguring the company’s business model, so as to compete effectively in an increasingly online and omni-channel retail landscape,” Oppenheimer & Co analyst Brian Nagel said in a report.
Minnesota-headquartered Best Buy also said the latest U.S. tariffs on Chinese imports affects about 7 per cent, or US$2.3-billion, of its cost of goods sold, and that it was working with vendors to mitigate the effects on its business.
Best Buy predicted tepid holiday-quarter earnings, raising fears that weak demand for Apple Inc.’s newest iPhones was already starting to show up in the results of major retailers.
Recent reports of lower demand for new iPhones make it likely that Best Buy expects weak smartphone sales, Wedbush Securities analyst Michael Pachter said.
A year earlier, Best Buy said the delayed launch of the iPhone X cost the company more than US$100-million in sales in the third quarter.
The company, which gets nearly half its U.S. revenue from mobile phones and computers, said it expects adjusted earnings of between US$2.48 and US$2.58 a share for the fourth quarter. Analysts were expecting US$2.58.
The forecast may be “appropriately conservative,” said Jason Benowitz, a senior portfolio manager at the Roosevelt Investment Group, as Best Buy prepares for a competitive holiday season.
Profit could also be pressured as Best Buy spends heavily on new tech support services, faster delivery and distribution centres that have greater capacity to house fast-selling products.