Best Buy's sales forecasts are not up to standard


(Reuters) – Best Buy Co Inc (BBY.N) accused US tariffs on imports from China and uncertainty about the future behavior of consumers to lower their annual sales forecasts, thus becoming the last company to raise concerns about the trade war between President Donald Trump in Beijing.

PHOTO FILE: People line up to shop at Best Buy at a Thanksgiving Day sales event in Westbury, New York, USA, November 22, 2018. REUTERS / Shannon Stapleton

Best Buy shares, which have lost more than 10% of their value so far this month, fell 7.7% at the start of the session as the retailer's sales prospects for the electronics retailer the general public fell short of analysts' expectations, even though they raised their profit forecasts.

The strong retail sales in July showed that US consumer demand has so far resisted signs of a slowing economy and escalating trade war between Washington and Beijing.

However, investors are increasingly focusing on how the industry will manage new price series with retailers, such as Macy's Inc. (m.n) and Abercrombie & Fitch Co (ANF.N) warning that their profits this year would take a hit.

Best Buy said it expects its same-year same-store sales to increase by 0.7% to 1.7%, which would reduce the expected margin of an earlier forecast of 0.5% to 2.5% and below the 2% forecast expected by analysts.

Last Friday, Trump's aid rates would rise from 10% to 300% of Chinese imports, from 10% to 15%, targeting some of Best Buy's best selling products, including smart watches, screen TVs flat, mobile phones and video game consoles. The samples will come into effect in two phases, on September 1st and December 15th.

The new general manager Corie Barry, Corie Barry, said the company was still looking at whether and how to increase product prices because it was collaborating with suppliers on new sourcing strategies.

"This is the most difficult place for us to make projections … We have no precedent for the number of moving parts that we currently have in place," Barry told analysts.

Barry estimated that all proposed and applied rates were about 60 percent of the cost of Best Buy's products but that the company was aiming to reduce that rate to 40 percent next year.

Overall Best Buy comparable store sales increased 1.6% in the second quarter ended Aug. 3, missing analyst estimates of a 2.15% increase, according to Refinitiv's IBES data.

Earnings per share excluding special items amounted to $ 1.08, exceeding analyst estimates of 99 cents per share and prompting Best Buy to increase annual adjusted earnings from $ 5.45 to $ 5.65 by 5.60 at $ 5.75 per share.

Revenues for the quarter reported increased 1.7% to $ 9.54 billion, a little under expectations of $ 9.56 billion, mainly due to lower demand for video game consoles , which, according to the company, would also put pressure on sales for the rest of the year.

The decline in demand is largely due to consumers delaying their purchases in anticipation of future Sony Corp6758.T) PlayStation and Microsoft Corp ((MSFT.O) Xbox.

Best Buy also expects third-quarter comparable store sales to be lower than estimated, but rates would not have much impact over the quarter.

Report by Uday Sampath in Bengaluru; Edited by Tomasz Janowski

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