Best Buy (BBY) continues to struggle with sluggish sales, as consumer demand fizzles after a spike during the pandemic.
The electronics retailer reported a mixed fiscal 2025 first quarter results on Thursday before market open. Adjusted earnings per share came in at $1.20, beating estimates of $1.08. But its net sales of $8.85 billion was a drop compared to $9.47 billion a year ago, and the $8.97 billion anticipated for this quarter.
CEO Corie Barry said a “mix of macro factors continued to create a challenging sales environment for our category during the quarter and our sales were slightly softer than our expectations,” in the release.
Total US sales dropped 6.3%, led by declines in appliances (down 18.5%), entertainment (down 11.3%), and consumer electronics (down 8.3%).
Computing and mobile phones were down just 2.2%, compared to the 4.17% decline expected, while international sales fell 3.3%.
The company’s service category, like its membership offerings, helped boost profit in the US, resulting in “better-than-expected Q1 profitability,” Barry said in the release. In Q1, domestic gross profit rate was 23.4% versus 22.6% last year.
For the fiscal year, the company reiterated its guidance for overall sales to drop between 3% to 0%. Shares of the company are down roughly 7% year to date, compared to the 11% gain of the S&P 500 (^GSPC).
Prior to the report, there were nine Buys, 15 Holds, and four Sells on shares of Best Buy.
Concerns around discretionary spending, as well as uncertainty around when the replacement cycle will begin, are clouding the outlook for the company.
Bank of America analyst Robert Ohmes, who maintains an Underperform rating on the stock, wrote in a client note that he expects “continued weakness in the appliance category given year-over-year declines in pricing and higher retail promotions as well as potential market share pressures from competitor Costco.” The wholesale retailer is set to report its earnings Thursday afternoon.
But there is optimism that the replacement cycle could kick in earlier. Product innovation around AI, showcased in products like Samsung’s AI-enabled phone and Microsoft Copilot laptops, could be a key driver.
Joe Feldman of Telsey Advisory Group wrote in a client note that the laptop segment “has already seen a positive comp (comparable sales) due to the replacement cycle,” adding that he expects more momentum as “new technology hits the market” for back-to-school season.
Jonathan Matuszewski at Jefferies voiced a similar notion, saying the “replacement cycle [is] picking up steam,” with customers looking at “consumer electronics, gaming consoles, home theater systems, and other related products.”
Wall Street is also keeping an eye on labor costs, as reports of Geek Squad layoffs came out in the quarter.
The earnings breakdown
Here’s what Best Buy reported, compared to Wall Street estimates, per Bloomberg consensus:
Adjusted EPS: $1.20 versus $1.08
Net Sales: $8.85 billion versus $8.97 billion
Total US sales: -6.30% versus -5.02%
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Appliances: -18.50% versus -9.92%
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Entertainment: -11.30% versus -2%
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Consumer electronics: -8.30% versus -6%
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Computing and mobile phones: -2.20% versus -4.17%
International: -3.30% versus -3%
The company also shared its revenue outlook, with expectations for it to come in between $41.3 billion to $42.6 billion for the year.
For Q2, it expects same store sales to decline by roughly 3%.
This story is breaking and being updated.
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Brooke DiPalma is a senior reporter for Yahoo Finance. Follow her on Twitter at @BrookeDiPalma or email her at bdipalma@yahoofinance.com.