Dive Brief:
- Best Buy’s third quarter revenue increased 2.4% year over year to nearly $9.7 billion, per a Tuesday press release. The electronics retailer reported a 43.4% drop in operating income to $198 million for the quarter and net earnings declined 48.7% to $140 million.
- Comparable sales across the company’s enterprise grew 2.7%. Comparable sales growth in Best Buy’s domestic segment was driven by sales in computing, gaming and mobile phones, partially offset by declines in home theater and appliances.
- The retailer raised its full-year guidance, now expecting revenue in a range from $41.65 billion to $41.95 billion, compared to previous guidance of $41.1 billion to $41.9 billion. Comparable sales growth is also now expected to be between 0.5% to 1.2% instead of the previously predicted decline of 1% to growth of 1%
Dive Insight:
CEO Corie Barry has previously expressed concern over a widening consumer income divide. But the executive sounded positive about consumer sentiment during the third quarter.
“For the most part, customer shopping behavior in Q3 did not change materially from the commentary we have shared for the past several quarters,” Barry said on a call with analysts Tuesday. “Customers remained resilient but deal-focused and attracted to more predictable sales moments, including our back-to-school sales events and our Techtober sales held in close proximity to the October Prime Day event.”
The retailer’s Q3 results and its strategic focus on omnichannel experience marked an upbeat tone for some industry analysts.
“We believe Best Buy continues to execute well and gain market share in the consumer electronics space, based on its ability to introduce newness, leverage its scale and vendor relationships, manage costs, and operate efficiently,” Telsey Advisory Group analysts led by Joe Feldman said in an emailed note Tuesday. “Looking ahead, newer initiatives, such as higher-margin membership, marketplace, and advertising businesses, as well as ongoing product innovation and the replacement cycle, should help fuel positive comp and earnings growth.”
Looking forward, CEO Barry said Best Buy will continue to focus on scaling new profit streams and providing more unique store experiences for consumers.
Best Buy debuted its own third-party marketplace in August, dramatically increasing its assortment. The retailer has seen high unit sales in accessories and small appliance categories for its marketplace so far and return rates are lower than those for its first-party product sales, Barry said on the call.
“Our Marketplace results had a positive impact on our Q3 gross profit rate, and we expect it to positively impact our Q4 gross profit rate as well,” the chief executive said.
The executive also highlighted some recent in-store experiences with different vendors during the call, such as its immersive showcase areas with Meta AI glasses demos at 50 stores. Additionally, she said Best Buy has now implemented most of the new Ikea pilots it announced in July.
The company has been using AI within customer support, personalized email marketing and product search and content, Barry said. More agentic AI integrations could be on the way, if the company can find a way to match it with its existing shopping experience.
“You really have to prioritize not just where the incremental margin flows through but what does the customer experience really look like,” Barry said on the call when asked about integrating something like ChatGPT’s Instant Checkout. “And particularly in a business like ours that often includes maybe scheduled delivery, maybe installation, maybe services or membership, you really need to think about in instant checkout, how do you want those experiences to translate for the customer? … So we’re obviously working quickly to make sure that we are relevant and showing up in the right places, but most important for us is protecting the customer experience so that that stays consistent with how we would want them to experience our own digital assets.”
Several other mass retailers have journeyed into agentic AI over the past few months, whether through their own tool development or integrating with external platforms. Walmart, Etsy and Shopify have all integrated with ChatGPT’s Instant Checkout commerce function. Additionally, Target debuted its own shopping application within ChatGPT earlier this month.