For Best Buy Co. Inc., overall sales dropped in the first quarter — and digital sales fell even more — compared with sales a year ago.
Best Buy’s Q1 2023 ended May 1. The electronics and home appliances retailer says revenue for its fiscal year 2023 was $10.65 billion, down 8.5% compared to $11.64 billion for the year-ago quarter. Best Buy did not break out specific online sales numbers but reported a 14.9% year-over-year decrease. Even so, online penetration remains at elevated levels compared with the pre-pandemic era, CEO Corie Barry said in a May 24 conference call with analysts. Best Buy Co. Inc. ranks No. 6 in the 2022 Digital Commerce 360 Top 1000.
“Our online sales as a percentage of domestic sales are 31%, still twice as high as pre-pandemic levels,” Barry said. “And revenue from virtual phone and chat interactions continues to increase rapidly.”
Barry also pointed out that Q1 revenue was $1.5 billion, or 16% higher than Q1 of the most recent pre-pandemic year, which was fiscal 2020. In addition, she said federal stimulus checks and the impact of the COVID-19 pandemic affected the comparison with fiscal 2022.
Barry said the timing of government stimulus payments in early 2021 boosted sales in the previous year’s first quarter.
Net earnings for the quarter were $341.0 million, down 41.7% from $585.0 million a year earlier.
Last year, Best Buy launched a membership program called Totaltech. For a $199.99 annual membership fee, members get benefits that include up to 24 months of product protection on most Best Buy purchases, including AppleCare+ on Apple products.
During the conference call, Barry said Totaltech memberships grew during Q1. She did not provide specifics.
Best Buy rolled out Totaltech nationally in October 2021 after testing it in several U.S. markets for six months. In addition to product protection, members get free tech support, free delivery and standard installation, discounts on labor for repairs and other benefits.
The product protection covers device failures due to causes such as manufacturing defects, normal wear and tear, power surges and overheating. For some products, the protection includes accidental damage from handling the device and battery replacement if the original battery fails to hold a charge.
Best Buy previously reported it expects the combination of membership revenue and incremental purchases by members to add $1.5 billion in revenue by fiscal 2025 compared to the current fiscal year — fiscal 2023 — which began on Jan. 31, 2022.
Full-year guidance gets less optimistic
For fiscal 2023, Best Buy now anticipates the following:
- Full-year revenue of $48.3 billion to $49.9 billion. That compares to the prior outlook of $49.3 billion to $50.8 billion.
- A decline in comparable sales of 3.0% to 6.0%. Best Buy’s previous outlook was a decline of 1.0% to 4.0%
- An operating income rate of 5.2% to 5.4%, compared to the prior outlook of approximately 5.4%.
Barry said she expects “elements of soft demand” this year but not a full-on U.S. recession.
U.S. consumers are “getting a little bit more wary” amid the highest inflation rates in four decades, she said. But technology is becoming more central to consumers’ lives, limiting the extent to which they’re looking to cut spending on Best Buy’s wares. Easing supply-chain constraints should improve the availability of popular merchandise such as Apple Inc. products, video-game consoles and speakers later in the year, she said.
In-home services gain ground
Best Buy is part of a small but growing portion of large online retailers offering in-home services. According to Digital Commerce 360 data, 7.6% of Top 1000 retailers offered home services in 2021, up from 5.8% the prior year.
Evidence shows a significant percentage of online shoppers want in-home services.
A survey of 1,113 online home goods shoppers that Digital Commerce 360 and Bizrate Insights conducted earlier this year found that almost half of online shoppers are likely to take advantage of these add-on services alongside their purchases.
In-home services are those that support a customer’s online purchase. Services can be supplied by the retailer or a third-party and would include in-home installation and assembly, in-home product repair, in-home tech support and other product support services that are completed at the customer’s residence. It doesn’t include instances when customers bring products to a store for repair or support.
For the quarter ended May 1, Best Buy reported:
- Sales of $10.65 billion, down 8.5% compared to $11.64 billion for the year-ago quarter.
- A 14.9% year-over-year decrease in online sales.
- Net earnings of $341.0 million, down 41.7% from $585.0 million a year earlier.
Percentage changes may not align exactly with dollar figures due to rounding.
Bloomberg News contributed to this report.
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