Best Buy on Tuesday forecast a smaller decline in annual sales than it previously forecast, saying it believes increased deals and discounts will attract more inflation-weary customers during the holiday season.
Shares of the retailer jumped 11% to $79.06, after it also beat quarterly earnings estimates and said it had resumed a share buyback program.
Higher prices have slashed demand for non-essential goods this year, forcing Best Buy and other retailers to turn to discounts and promotions to get rid of stocks of goods, including televisions, laptops and more. electronic devices.
Best Buy expects full-year comparable sales to decline about 10% for the year ending in January, compared to a previous forecast of a decline of about 11%.
The company, along with other retailers like Target and Macy’s, expects Americans to leave holiday gift shopping as late as possible while they hunt for the best deals.
Best Buy CEO Cory Barry said shopping activity will be concentrated during the week of Black Friday, Cyber Monday and the two weeks leading up to Dec. 25, a change from previous years when holiday shopping spanned three months, adding that the retailer is planning discounts accordingly. To better manage inventory levels.
“Best Buy may do better this holiday season than other retailers,” said Jason Benovitz, senior portfolio manager at Roosevelt Investment Group.
“We expect modest growth in consumer holiday spending this year and believe many companies have too much inventory relative to demand, while Best Buy appears to have expanded its holdings pre-season,” Benovitz added.
However, deeper discounts will impact quarterly profit margins, Best Buy warned.
On an adjusted basis, the company earned $1.38 per share in the third quarter, beating analyst estimates of $1.03 per share, according to IBES data from Refinitiv.