Best Buy Offers Gloomy Outlook

Best Buy on Tuesday (Aug. 26) conceded that it was projecting a gloomy next couple of quarters, as the consumer electronics chain signaled its third consecutive year of falling revenue, the Wall Street Journal reported.

“‘You cannot expect the same kind of growth rates that you saw a few years ago,'” CEO Hubert Joly told the Journal. “The company’s shares fell 6.9 percent to $29.80 on Tuesday.”

Although almost all of the major retail chains have been suffering as online—and especially mobile—moves reduce margins and shift some sales to online specialty sites as well as Amazon, Best Buy’s consumer electronics focus has made it especially vulnerable. Customer service concerns have also proven to be weigh down Best Buy more than some of its rivals.

“Earlier this year, Best Buy pledged to invest in its online operation to help combat the difficulties it faced last year. That appears to be working but at a cost. The company clocked a 22 percent gain in online sales, but executives suggested the shift to the Internet could also be sapping growth and hitting margins,” the Journal reported. “Online buyers haven’t been adding as many electronic accessories and service contracts to their shopping carts, which has hurt the company’s sales and overall profitability.”

In the interview, Joly tamped down expectations that Apple’s highly-anticipated new iPhone rollout would meaningfully help Best Buy revenue. Even though new iPhone and iPad introductions have given some chains—including Best Buy—sharp but temporary revenue boosts before, the CEO has low expectations this time. Or he’s at least trying to set lower expectations.

Asked about an anticipated Apple sales boost, Joly said “we’re not making that assumption” because chain executives saw the smartphone market as too saturated to generate “a meaningful sales boost from new device launches.” It’s also worth noting that Best Buy has relatively little—if any—value-add to offer iPhone shoppers, in the sense that the product, support and pricing will be identical to what other retailers (including Apple) will offer.

“Best Buy also tempered expectations for a sales windfall from the next wave of ultrahigh-definition television sets, which have seen prices decline but remain too pricey for a typical consumer,” the Journal reported. “In the recent quarter, Best Buy’s overall sales fell 4 percent to $8.9 billion. Profit for the period fell to $146 million from $266 million a year ago, when a legal settlement added $229 million to its bottom line.”