Best Buy triples down on call for bottom in tech demand

By Tomi Kilgore

Analyst sees a number of 'green shoots' to confirm the view that the worst is in the past

Best Buy Co. Inc. Chief Executive Corie Barry is making the call for a bottom in tech demand on the consumer-electronics retailer's post-earnings conference call with analysts, according to an AlphaSense transcript.

But even as Corie continued to back the call she made in May, after fiscal first-quarter results; and in March, after fourth-quarter results, Best Buy still trimmed its full-year outlook for revenue.

The company (BBY) said it now expects fiscal 2024 revenue of $43.8 billion to $44.5 billion, down from previous guidance of $43.8 billion to $45.2 billion.

The midpoint of the new guidance range -- $44.15 billion -- implies a 4.6% drop from a year ago and is below the current FactSet consensus of $44.25 billion.

That's because the consumer continues to make "careful choices and trade-offs" given a number of macroeconomic headwinds, which will soon include the resumption of student loan payments in October.

"Our industry continues to experience lower consumer demand due to the pandemic pull forward of tech purchases and the shift back into services spend outside the home, like travel and entertainment," Barry said. "In addition, of course, persistent inflation has impacted spending decisions for a substantial part of the population."

Meanwhile, the FactSet consensus for fiscal 2025 revenue of $44.39 billion implies 0.5% growth from the guidance midpoint.

Best Buy's stock jumped 4.8% in afternoon trading, which puts it on track for the best one-day performance since it ran up 12.8% on Nov. 22, 2022, after the company beat fiscal second-quarter profit, revenue and same-store sales expectations and nudged up its full-year profit outlook.

Analyst Michael Baker at D.A. Davidson said while he believes much of the stock's positive reaction was a result of low expectations heading in to the report, there were good reasons to be optimistic for the coming quarters.

On the post-earnings conference call, as well as on a post-call conversation with Best Buy executives, "we heard a number of incremental green shoots that continue to suggest to us that the worst is behind us both with respect to [Best Buy's] financial trends and as it relates to [Best Buy's] stock price performance," Baker wrote in a note to clients.

The stock has tacked on 4.5% over the past three months, while the S&P 500 index SPX has gained 6.8%.

-Tomi Kilgore

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08-29-23 1439ET

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