Best Buy reports another quarterly sales decline as shoppers pull back spending on gadgets

NEW YORK — Best Buy, the nation's largest consumer electronics chain, on Tuesday reported another quarterly drop in sales as Americans continued to tighten their purse strings on appliances and gadgets to focus on essentials.

The Richfield, Minnesota-based retailer lowered its annual sales and profit outlook, underscoring the challenges it faces as it heads into the traditional kickoff to the holiday shopping season. Shares were down nearly 8% in late morning trading.

During a call with analysts following the earnings report on Tuesday, Best Buy's CEO Corie Barry said that the chain wrestled with economic uncertainty, shoppers' waiting for deal and the disruption during the run-up of the election, particularly in non-essential categories. The company has seen sales rebound but Barry noted that the season will be very promotional.

Best Buy kicked off Black Friday sales on Nov. 21, a week earlier than last year, and brought back a version of doorbusters— limited-time-only deals on specific products. It started them Nov. 8 and it plans to make them available both online and in store every Friday through Dec. 20.

''We are managing well what we can control in what remains a volatile environment,'' Barrie told analysts during the call.

Best Buy, like other retailers, is also bracing for President-elect Donald Trump's threat to impose sweeping new tariffs on Mexico, Canada and China as soon as he takes office as part of his effort to crack down on illegal immigration and drugs.

Barry told analysts and reporters on two separate calls Tuesday that the company believes that diversification of sourcing in consumer electronics is a ''good thing but it's also very hard to do.''

The supply network is complex as well as the fabrication plants for consumer gadgets, she said.

Moreover, Best Buy has very little control of sourcing, directly importing only about 2% to 3% of its cost of goods sold, she said. The majority of that has been moved out of China.

But Barry says it's reliant on its vendors and estimates that 60% of the company's cost of goods sold come from China. The second-largest importing country is Mexico.

Best Buy has a team looking at how tariffs will impact its business, but she said that the retailer operates on very thin profit margins. So while vendors and the company will shoulder some costs, the company will have to pass on higher costs of the tariffs to its customers in the form of higher prices.

''These are goods that people need, and higher prices are not helpful,'' Barrie told analysts during the earnings call.

The company reported earnings of $273 million, or $1.26 per share, for the quarter ended Nov. 2. That compares with $263 million, or $1.21 per share, a year ago.

Sales fell to $9.45 billion from $9.76 billion in the year-ago quarter.

Analysts expected earnings of $1.30 per share on sales of $9.63 billion, according to FactSet.

Comparable sales — those sales from online channels and physical stores — fell 2.9% in the quarter.

The company said that sales of appliances, home theater and gaming declined. That was partially offset by growth in the computing, tablets and services categories.

For Best Buy, the latest trends are a reversal from the height of the pandemic, when its sales were fueled by outsized spending from people splurging on electronics to help them work from home, or to get their children better equipped for virtual learning. Government stimulus checks also fueled spending.

To perk up sales, Best Buy has been modernizing its stores to entice shoppers and focus on its paid membership services.

Best Buy now expects annual sales in the range of $41.1 billion to $41.5 billion, down from prior guidance of $41.3 billion to $41.9 billion. Analysts anticipated $41.54 billion, according to FactSet analysts.

It now expects earnings per share to be in the range of $6.10 to $6.25, which compares to prior guidance of $6.10 to $6.35. Analysts expected $6.26 per share.

Shares were down $7.20 to $85.83 in late-morning trading.