Best Buy gears up for rivals to cut prices as pandemic-fueled demand declines

Best Buy said on Thursday it was bracing for tough momentum in the coming months: rivals are cutting prices to try and maintain sales momentum as favorable winds from the pandemic recede.

CFO Matt Bilunas said the company expects strong sales in the first quarter, but said profits could be weighed down. Like Best Buy, he said, some other retailers will be compared to big numbers because of their big gains during the global health crisis.

“We expect more promotional pressure than we have experienced this year as stocks become more available and competition will likely increase,” he said on a call with investors and analysts.

Best Buy is among retailers who have seen sales increase as people locked in their homes during the global health crisis. After being forced to work and learn from home, many consumers have had to rush to buy new computer monitors, printers and other tools. When they started cooking more, they also looked to improve their appliances, while others turned to 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 enticing shoppers with enticing selling prices.

Demand fueled by a pandemic started at Best Buy and other big box stores like Walmart and Target in the first quarter of last year, as people faced home orders and started stocking up on what they needed, from groceries to technological equipment.

Sales growth accelerated at Best Buy in the following months, as the global health crisis intensified and time spent with consumers extended. For Best Buy, sales growth peaked in the fiscal third quarter, which ended Oct. 31, as online and in-store sales open for 14 months or more increased 23%.

Target also took advantage of the fact that its doors remained open during spring closings – with strong sales in consumer electronics and less merchandise ending on the liquidation medium. Its chief financial officer Michael Fiddelke said on a call with investors and analysts that the discounter had “sold an above-average mix of our regular-priced units.” He said this reduced the number of promotions to avoid increasing the number of stockouts customers were facing.

Best Buy beat Wall Street expectations for the fourth quarter, but slowing sales resulted in a sell off Thursday. Stocks fell more than 8% Thursday morning.

The big box retailer said it will face another headwind, especially when people resume their pre-pandemic spending habits in the fall and winter. Bilunas said he expects same-store sales to fall 2% or increase 1% for the year as consumers invest their money in restaurants or vacations rather than buying a new one. laptop or home theater.