NEW YORK – Best Buy reported a shortfall in sales for the holiday quarter as the nation's largest electronics chain struggled with limited supplies of holiday products and was forced to reduce store hours because of a shortage of workers due to the omicron variant.
The chain, based in Minneapolis, also announced on Thursday profits in line with Wall Street expectations.
Shares rose more than 9% in afternoon trading based on an upbeat long-term outlook that Best Buy offered. To fuel future growth, Best Buy is betting on its investments in telehealth, online fitness, and video conferencing — areas that have boomed during the pandemic and that are expected to continue to do well after the health crisis.
Like many retailers, Best Buy struggled with rising costs for everything from labor to shipping as supply chain backups hit companies worldwide during the holidays. The electronics chain also had to navigate global chip shortages. This past holiday quarter also offered an extra challenge: a contagious new variant, omicron, that forced many workers to take sick leave and pushed some companies to cut hours. However, several other major retailers like Walmart and Target were able to push through the supply chain challenges and report strong sales.
In a statement, Best Buy CEO Corie Barry acknowledged that constrained inventory of hot holiday items hurt sales, but she also said that the company reached its fastest holiday delivery times ever, shipping products to customers' homes more than 25% faster than last year and two years ago.
Best Buy is betting on expanding its membership program called Totaltech, which was launched last October and costs $199.99 per year. It includes such benefits as free delivery and standard installation and other services. Best Buy is also moving deeper into telehealth services. In October, it signed an agreement to acquire Current Health, a tech company that assists with remote patient monitoring and telehealth, marking its latest acquisition in the health technology industry.
But Best Buy's latest quarter showed the short-term challenges it faced. It said that earnings fell to $626 million, or $2.73 per share, for the three-month period ended Jan. 29. That's compared with $816 million, or $3.48 per share, in the year-earlier period.
Revenue was $16.36 billion, down 3.4% from $16.94 billion.
In the U.S., sales were down nearly 3%. Sales at domestic stores opened at least a year were down 2.1% compared to growth of 12.4% in the prior-year quarter. Comparable sales were dragged down primarily from declines in gaming, mobile phones, tablets and services. Appliances, virtual reality, home theater and headphones all had sales increases. Barry told analysts at the meeting on Thursday that mobile phones and computing saw their supplies constrained the most.
The company expects earnings per share for the current fiscal year to range from $8.85 to $9.15. It projects revenue in the range of $49.3 billion to $50.8 billion.
Analysts expected $9.29 per share on revenue of $50.88 billion, according to FactSet.
But the company said that it expects sales in the range of $53.5 billion to $56.5 billion for the fiscal 2025 year. Analysts expect $53.5 billion, according to FactSet.
Barry said that the company is focusing on investing in the future to deliver growth long term and noted she expects fiscal 2025 to deliver revenue growth and operating income rate expansion well beyond the past year.
Shares rose $9.32 to $110.15 in afternoon trading.
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