For more than two years, Best Buy sales have dragged as the consumer electronics industry has been in a multiyear standstill waiting for the next big thing in technology.
This spring, the Richfield-based electronics chain finally may have received a new sales stimulant — artificial intelligence-enhanced Microsoft Copilot+ PCs. That promise, along with a small, better-than-expected profit bump for the spring quarter, led to the biggest one-day jump in the Richfield-based shares since the pandemic began.
Yet, Best Buy's obstacles were still apparent Thursday when it reported the 10th straight quarter of same-store sales declines, a reported 6.1% drop for February, March and April. Its total revenue of $8.85 billion was a little lower than Wall Street anticipated.
But Best Buy's shares, though, closed at $81.55, rising more than 13% after the company said it earned $246 million, or $1.13 a share, which rose less than 1% from the same quarter a year ago. The retailer's stock price hasn't climbed that high that fast since March 24, 2020, when it jumped 16.8%.
Best Buy leaders say they are optimistic about the future and are on track to meet the middle range of sales projections of a slight decline to flat growth for the year as the company enters a "ripe timeframe for replacing almost a generation of computing," Best Buy CEO Corie Barry said on a call with analysts Thursday.
"This is not everyone is lined up at the front door waiting to run in and grab the new computer, but it is enough, like most things in [consumer electronics], where it starts a little bit more premium, has some of the attributes, drives some of the interest and allows us the chance to partner with our vendors to really think differently about how we go to market with a new generation of computing," she said.
Already the preorders of Copilot devices are slightly outpacing Best Buy's early expectations, Barry said.
As for Thursday's big stock surge, investors were likely relieved Best Buy's sales hadn't been worse even with some of the economic pressures, said Anthony Chukumba, an analyst at Chicago-based Loop Capital Markets.
"I think investors have been so down on retailers," he said.
Best Buy saw large jumps in sales during the pandemic as people had the disposable income and the desire to upgrade their homes with new laptops and better televisions. But like other retailers, since the end of 2021, Best Buy has struggled with how to boost sales.
"In February, we said we expect 2024 to be a year of increasing industry stabilization, and we continue to believe that," Barry said, on Thursday. "That being said, clearly, macro factors continue to fluctuate and put pressure on consumer spending."
It's a narrative Barry has repeated for months as she has had to continually explain Best Buy's sluggish sales and the hope on the horizon for the company once the electronics industry recovered. The demand for electronics like many other consumer goods is cyclical, she has said. The industry will see growth, but it has just been a question of when.
"The macro is still just not good and at the end of the day [Best Buy] sells a lot of high-ticket discretionary goods," Chukumba said.
For example, home sales, which are often a positive for Best Buy as shoppers need new appliances and televisions, have trended down in recent months, Chukumba said.
Best Buy is hoping a new line of AI-powered computers will be part of the answer even as the market has become more competitive in terms of prices. Last week during a broadcast event, Microsoft unveiled the Copilot lineup of laptops with "recall" ability to easily find documents, advanced AI image generation and all-day battery life. Best Buy will have the largest assortment of Microsoft's new Copilot+ laptops and is the exclusive retailer for some models.
Preorders for the computers, according to Best Buy's website, cost $1,000 or more as of Thursday afternoon, and have already begun with members of Best Buy's paid loyalty program offered a free 50-inch television with purchases. The computers will be available in stores in mid June.
"AI continues to be a major driver in tech innovation, and this new category of powerful devices will change how our customers think about and use their computers," said Jason Bonfig, Best Buy's senior executive vice president of customer offerings and fulfillment, in a statement.
Best Buy saw a bump in comparable sales of laptops in the winter months, a trend that continued this spring. Best Buy is also seeing positive trajectory in sales of new iPads. But sales of appliances, home theater, gaming and mobile phones were on the decline.
Earlier in the year, Barry said Best Buy saw more demand than expected for Samsung's AI-enabled phone. There are also televisions with AI technology though product range is still in the early stages, Barry said.
Best Buy's relationship with AI hasn't been limited to merchandise. Late this summer, U.S. customers will be able to get help from a generative AI assistant online, through the mobile app or over the phone. The assistant will help customers with product issues, order delivery and more. Best Buy employees will also be able to use AI-enabled tools to summarize conversations and detect sentiment. Store employees with AI-powered assistants will have easier access to product guides and other resources.
While Best Buy has invested in AI, it has continued to become a leaner company with the retailer announcing it incurred $15 million of restructuring charges related to employee termination benefits compared to $169 million of restructuring charges last quarter. Best Buy has said employee layoffs have been to right-size resources and better align with how customers want to shop.
Best Buy has also shrunk its footprint. It closed 24 stores last fiscal year and it plans to close 10 to 15 stores this year. Its U.S. store count has gone from almost 1,500 in fiscal year 2014 to less than 960 as of this past quarter. The company said earlier this year that it would test small format stores.
Staff writer Patrick Kennedy contributed to this report.
