One analyst is arguing Best Buy (BBY) may not have done as well this quarter as some might think. Despite slightly outperforming the S&P 500 for December, the retailer faced a much more cautious consumer-environment this holiday season, in which electronics sales were notably down compared to last year.
Loop Capital analyst Anthony Chukumba said in an interview, “I think that Best Buy is going to have kind of a tough fourth quarter. But I think everyone sort of knows that. I mean, one of the issues that Best Buy is dealing with, aside from the macroeconomic headwinds, is the fact that you did have this very significant demand pull forward in 2020 and 2021 due to the pandemic.”
Analysts generally agree most signs are not encouraging, as November sales overall were down, with electronics sales especially under pressure.
This week, Mastercard released it’s SpendingPulse report, which showed electronic sales fell 5.3% from November 1st to December 24th. It was the second worst sales performance for a category, coming in just behind jewelry, which saw a 5.4% drop.
Mastercard North America chief economist Michelle Meyer noted, “Inflation altered the way U.S. consumers approached their holiday shopping – from hunting for the best deals to making trade-offs that stretched gift-giving budgets.”
And the momentum in sales was not on Best Buy’s side. In the third quarter, same-store sales in almost all lines of the business fell. Profit margins fell precipitously in both domestic and international segments while US same-store sales fell 10.5% and international same-store sales were down 9.3%.
Shares of the retailer have lost 21% year to date.
While Chukumba feels Best Buy has likely had a rough holiday season, he notes the big question is whether all of this bad news has already been priced into the stock. He says he suspects the company’s stock valuation may have reached a trough.
Chukumba said, “Now, here’s the good news in terms of Best Buy shareholders. That’s [a bad fourth quarter] more than priced into the stock, particularly at current valuation levels. So I don’t think that Best Buy having a tough holiday selling season is going to be a big surprise to anyone.”
