Best Buy reports weak holiday shopping results, outlook

Based on weaker-than-expected holiday season, the company revised down its fourth quarter of fiscal 2016 (4QFY16) outlook. But Best Buy may have to be proactive on the store closure front ahead of what could be another challenging year for sales.

In fact, lackluster consumer interest in electronics led Best Buy to report a decline in same store sales of 1.4% over the nine week period ended January 2.

Best Buy’s domestic revenue declined 0.8 percent, but the company said that was better than the broader consumer electronics industry, which experienced deeper declines. The executive also mentioned that online revenue for the holiday period grew 12.6%. Now, it expects 1.5% year-over-year (YoY) fall in domestic revenues for the quarter, compared to its previous expectations of flat revenues.

Joly said technology innovations are expanding into other categories like clothing, and he expects Best Buy to embrace that.

However, the company raised its operating income rate outlook – from a decline of 20 to 35 basis points to a decline of 10 to 15 basis points – due to its “disciplined promotional strategy and strong expense management”, Joly said. Many of those who have reported sales declines, including Macy’s and Gap Inc., have pointed to the unusually warm temperatures in many parts of the country during November and December as a major culprit as shoppers were not as interested in buying items such as sweaters and scarves. Meanwhile, Best Buy has been improving the shopping experience at the stores.

Best Buy Co. shares dropped $3.42, or 11.6 percent, to $25.84 in morning trading Thursday.