The recession for electronics continued this spring as Best Buy reported same-store sales dropped a little more than 10% from last year.
Total sales for February, March and April of nearly $9.5 billion were lower than the $10.6 billion the Richfield-based company reported the same time last year and came in just a few million shy or mostly in line with what Wall Street expected.
It's a trend that has persisted for Best Buy for the past year and that company leaders think will continue until electronics shoppers need to update the devices they purchased during the pandemic.
"We've been seeing a consumer who is, whether or not you call it a recession, exhibiting some recessionary behaviors depending on the different category that you are talking about," said Best Buy CEO Corie Barry in a call with analysts.
On Thursday morning, the company said it earned $244 million, down more than 28% from $341 million a year ago. Its adjusted per-share profit, which doesn't include non-cash expenses, amounted to $1.15, which was more than the $1.11 analysts forecast.
Electronics sales have been on the decline for the past year at many retailers as consumers are reluctant to spend money outside of necessities like groceries while dealing with high inflation. And many households still have a hoard of newish gadgets they bought when they had to work, study and play from home during the pandemic.
Some of the categories Best Buy is seeing softness in are computing, home theater, appliances and mobile phones.
"Specifically in [consumer electronics,] given especially how much demand we saw through the pandemic, the consumer was going to make trade-off decisions, and it's a consumer that clearly when they're faced with record-high inflation vs. 2020 in food, housing and fuel, that's going to drive those trade-off decisions," Barry told analysts.
Last week, Target said its apparel, home and hardlines sales — which includes sporting goods and electronics — experienced sales declines from the mid-single digits to low-double digits. Walmart saw comparable sales drop in the mid-single-digit range for general merchandise sales, which its leaders said reflected softness in discretionary categories including home, electronics and apparel.
Electronics manufacturers are also feeling the pain. South Korean electronics company Samsung reported its operating profit tanked more than 90% in the first quarter of the year compared to 2022. Phone behemoth Apple saw revenue decline slightly, however, iPhone sales were a little better than analysts expected.
Another indicator there's a decline in the tech sector is the rise of layoffs. At the beginning of the year, Microsoft announced it would lay off 10,000 workers. In March, Amazon leaders said the online retailer would eliminate 9,000 jobs after announcing it would lay off 18,000 employees.
In April, Best Buy laid off hundreds of workers in a week as the retailer continued to adjust its business. In the past three years, Best Buy's workforce has been reduced by about 25,000 people or 20% as it also has closed around 70 large-format stores with plans to close more this year and in the coming years. Best Buy said Thursday a lot of the workforce reduction during the pandemic came through attrition and the company's decision not to backfill jobs.
Best Buy leaders said the industry's promotional environment has normalized in recent months. The company expects possibly by the end of this year or by next year that the industry will stabilize as consumers update items like mobile phones. As more innovative products come out and people decide to upgrade their devices, consumer electronics sales will eventually rebound, Best Buy leaders said.
"People will upgrade and want to replace their equipment and their consumer electronics," Barry said. "And so I think what gives us confidence is understanding that there is a very large vendor community out there that is very interested in continuing to stimulate demand, continuing to create really cool solutions for our customers, and that over time, I don't see a world where we rely less on technology."
To continue to engage with customers, Best Buy announced earlier this month updates to its membership program to make it more affordable and tailor services for different customers. Starting next month, the memberships come in three tiers: My Best Buy (which is free), My Best Buy Plus for $49.99 and My Best Buy Total for $179.99.
