Best Buy is struggling to dig itself out of a hole. Poor holiday sales won’t help that effort.
The big box electronics retailer posted disappointing holiday sales on Thursday, forcing it to slash its earnings forecasts.
Best Buy said it experienced poor demand for mobile phones and other consumer electronics. Now, the company expects fourth-quarter domestic sales to shrink — instead of remaining flat — as holiday sales declined nearly 1%.
The retailer is getting “whacked” as more consumers instead choose to buy online directly from brands, such as Apple, said Paula Rosenblum, managing partner at RSR Research.
“Millennials aren’t interested in wandering around from brand to brand — it’s easier to buy online,” she said.
Best Buy shares plunged over 9% on Thursday, leaving them down by one-third over the past year.
A broader holiday sales slump that hit the retail industry has delivered an especially hard blow to Best Buy, which had been enjoying a pretty significant turnaround under CEO Hubert Joly.
Joly, who took the reins in 2012 under extreme pressure to whip the company back into shape, has slashed costs, invested in its online business — even offering free shipping — and focused on providing better customer service inside its stores.
It paid off, as things were looking brighter for the company earlier in 2015, posting net income of $418 million in the first three quarters of the year.
But the dismal holiday season has pushed Best Buy back into rocky territory.
“They’ve been price-matching everybody, so I don’t think they’re going to make any money,” said Rosenblum. “It’s really disappointing.”
Plus, there’s more noise bombarding consumers as holiday deals start earlier each year.
Retailers need to start “winding down the cadence of promotions,” Rosenblum said. “This hyper-promotional madness … is just turning around and shooting retailers in the foot.”
Best Buy also reiterated that it expected international revenue to fall 30% in the last quarter of the year, due to low demand in Canada and currency fluctuations. The company has already shuttered many of its Canadian stores in recent years.
