Baseball legend Yogi Berra believed you don’t have to swing hard to hit a home run.
“If you got the timing, it’ll go,” he said.
Corie Barry also sees the importance of timing in business.
The Best Buy (BBY) CEO gave analysts the particulars on the consumer electronics retailer’s fourth-quarter earnings results, which saw the company beat Wall Street’s expectations.
The company earned $2.72 per share on sales of $14.64 billon, while analysts surveyed by FactSet were expecting Best Buy to earn $2.52 per share on revemue of $14.55 billion.
A year ago, Best Buy posted fourth-quarter earnings of $2.61 per share on $14.7 billion in sales.
During the company’s Feb.29 earnings call, Barry said macro pressures continue to impact retail overall and consumer electronics in particular.
While inflation has slowed, she said “prices for the basics like food and lodging are still much higher and consumers have to prioritize and make trade-off spend decisions.”
In addition, Barry said consumers tend to spend on services like concerts and vacations instead of goods, even as those prices have also inflated.
Analysts revamp their price targets for Best Buy. Photographer: Graham Hughes/Bloomberg via Getty Images
Best Buy CEO: ‘Our industry will grow again’
She also cited a relatively stagnant housing market and noted that the level of innovation in the consumer electronics sector was lowered “during the pandemic and supply chain-challenged years.”
On the plus side, Barry pointed to decreasing inflation, leading to the lowering of interest rates, continued low unemployment, encouraging trends in consumer confidence, and the beginnings of a housing market rebound.
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“We remain confident that our industry will grow again after two years of decline,” she said. “It is simply a matter of the timing.”
Barry said Best Buy believes that much of the growth during the pandemic was incremental, creating a larger installed base of technology products in consumers’ homes.
Best Buy expects sales in the computing category to improve through the year and show growth for the full year, Barry said, “as early replacement and upgrade cycles gain momentum and new products featuring even more AI capabilities are released as we move through the year.”
However, despite the earnings beat, Best Buy shares finished down on March 1, as Barry warned of another year of softer sales and said the company would lay off workers and cut other costs across the business.
She said that cuts will free up capital to invest back into the business and in newer areas, such as artificial intelligence.
“This is giving us some of that space to be able to reinvest into our future and make sure we feel like we are really well positioned for the industry to start to rebound,” she told reporters, according to CNBC.
Chief Financial Officer CFO Matt Bilunas told analysts that “as our ongoing practice, we will continue to close existing traditional stores during our rigorous review of stores as their leases come up for renewal.”
“In fiscal ’24, we closed 24 stores,” he said. “And in fiscal ’25, we expect to close 10 to 15 stores.”
Analyst: Best Buy controlling ‘what they can’
Analysts responded to the electronic retailing giant’s earnings by raising their share price targets.
Truist analyst Scott Ciccarelli raised the firm’s price target on Best Buy to $87 from $68 while keeping a hold rating on the shares.
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The company is controlling what they can, but life cycles need to reassert to drive upside in the stock price.
Best Buy is tightly managing its labor model, Ciccarelli said in a research note, but insufficient labor levels can work against the company from a share perspective.
Telsey Advisory Group analyst Joseph Feldman boosted his price target for Best Buy to $85 per share, up from $75, while maintaining a market perform rating on the stock.
Feldman said Best Buy’s earnings-per-share beat the firm’s estimates, driven by better-than-anticipated sales and profitability.
Fourth quarter comparable sales, however, were still weak given a challenging industry and macro environment.
Overall, Feldman said, Best Buy has a sound strategy, a strong management team and is ahead of many others in this space in its omnichannel capabilities, use of real estate and new revenue streams.
Jefferies raise the firm’s price target on Best Buy to $95 from $89, while keeping a buy rating on the shares following what it calls “slightly better” fourth quarter results.
The firm said that computing category momentum is testing the thesis of investors skeptical of the replacement cycle tailwinds in 2024.
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