Is the consumer electronics ice age finally over?
Investors are hoping Best Buy’s earnings report will help answer that question—and settle a Wall Street debate that has been brewing ever since CEO Corie Barry suggested last August that consumer demand would pick up in 2024.
Best Buy will report earnings for its fiscal fourth quarter—which ended in January—on Thursday before the market open.
It hasn’t been easy for electronic retailers lately. Many households stocked up on new televisions and consoles during the pandemic years, resulting in fewer sales throughout 2023.
The budding argument among bulls say the chill surrounding the sector could thaw in 2024, as people replace or upgrade the electronics they bought in 2020. Demand trends for gaming, laptops, and TV units were also seen to improve modestly throughout the holiday season.
“Most importantly, we see potential for product innovation cycles
to build in 2025, which is powerful not only for industry growth, but also for BBY market share gains as consumers frequently want to see new technology in person before buying it,” wrote Wedbush analyst Seth Basham in a recent note to clients.
While Basham is growing more constructive on the electronics industry, he maintains a Neutral rating on Best Buy shares. Quarterly results and guidance won’t be enough of a catalyst for the stock, he wrote. Plus, there’s still a risk that upgrade and innovation cycles get pushed back—a concern echoed by other analysts.
“It still remains unclear when the replacement cycle for the category will kick in,” wrote UBS analyst Michael Lasser, who also rates the stock at Neutral. “While BBY has previously articulated some hope it would happen this year, the softness in 4Q [the fourth quarter] might mean it’s more likely that it will occur in FY’26.”
Citi’s Steven Zaccone, who rates the stock at Sell, agrees. He predicts that same-store sales will decline again in the current fiscal year (after a likely decline in fiscal 2024) and pressure margins. Analysts estimate that same-store sales fell 6.8% in the full fiscal year that just ended in January.
“On an annual basis, 2023 was the worst year for electronics since the pandemic and 2024 has been off to a slower start thus far,” he wrote in a note last week. “In our view, trends will likely continue into the first half of 2024 before reversing in the back half of the year.”
Sales at electronics and appliance stores fell 0.4% in January from December, and were 5.8% lower compared with the year-ago period, according to the latest retail sales report.
Consensus estimates are siding with the bears for Best Buy’s fiscal fourth quarter. Analysts project Best Buy’s sales will tick down 1% to $14.6 billion, and predict that same-store sales will be 5.4% lower, according to FactSet.
Adjusted earnings are forecast to be $2.52 a share, down from $2.61 in the year-ago quarter.
Best Buy stock has inched up 1.8% this year through Thursday’s close, whereas the S&P 500 is up 6.3%.
