For more than two years, Best Buy's sales boomed as the company waited for the next big thing in technology.
This spring, the Richfield-based electronics chain finally found a solution. Officials believe buyers will open their pocketbooks to artificial intelligence — especially Microsoft's Copilot+ PCs AI-enhanced laptops unveiled last week.
On Thursday, Best Buy reported a 6.1 percent drop in its same-store sales in February, March and April, its 10th straight quarter of sales declines. Its total revenue of $8.85 billion was slightly below Wall Street expectations. But its shares rose more than 11 percent on Thursday morning after the company posted better-than-expected profits.
Even with continued sales declines, Best Buy leaders say they are optimistic about the future and are on track to meet sales estimates of slightly declining flat growth for the year as the company “computes Almost a generation is entering a reasonable time frame to change,” Best Buy CEO Corey Berry said on a call with analysts on Thursday.
“It's not like everyone is lining up at the front door waiting to get their hands on a new computer, but it's pretty much like a lot of things. [consumer electronics] Where it starts a little more premium, it has some features, generates some interest and gives us an opportunity to partner with our vendors on how we go to market with the next generation of computing. “You can really think about it differently,” he said.
Barry said pre-orders for Copilot devices are already slightly ahead of Best Buy's initial expectations, even though most laptops cost more than $1,000.
Best Buy saw a big jump in sales during the pandemic as people had more disposable income and wanted to upgrade their electronics with new laptops and better televisions while stuck at home. But like other retailers, since late 2021, the retailer has struggled with how to boost sales amid sticky inflation.
“[The consumer electronics industry] It was a key recipient of the demand push during the first two years of the pandemic, Berry said in a call with analysts in February. “When consumers need to prioritize the basics that typically don't involve purchasing the product they recently drew. Next. And finally, the level of [consumer electronics] Product innovation has slowed during years of pandemic and supply chain challenges.”
It's a narrative Barry has repeated for months as he has to constantly explain optimism about the company's horizon after Best Buy's sluggish sales and a stabilizing electronics industry. He said that like many other consumer goods, the demand for electronics is also cyclical. The industry will recover, but it's just a question of when.
Best Buy is hoping a new line of AI-powered computers will be part of the answer, even as the market has been more promotional than executives expected, with shoppers wanting more for the sale. are
During a widely publicized event last week, Microsoft unveiled its Copilot lineup of laptops that include “recall” capabilities to easily find documents or web pages, state-of-the-art AI image generation capabilities, There are enhanced video call effects and all-day battery life. Best Buy will have the largest assortment of Microsoft's new Copilot+ laptops and is the exclusive retailer for some models.
Pre-orders have already begun with members of Best Buy's paid loyalty program offering a free 50-inch television with purchase. The computers will be available in stores in mid-June.
“AI is a key driver of technology innovation, and this new category of powerful devices is changing the way our customers think about their computers and how they use their computers,” said Jason Bonfig, senior executive vice president of customer offerings and fulfillment at Best Buy. It will change the way it is used.” a statement.
Best Buy worked with Microsoft, sharing insights about what its customers wanted in devices, he said.
Best Buy already saw comparable laptop sales increase during the winter months, a trend that continued this spring. Sales of appliances, home theater, gaming and mobile phones declined in the quarter.
Earlier in the year, Berry also said that Best Buy saw “materially higher demand than we expected” for Samsung's AI-powered phones.
In Thursday's earnings outlook preview, Telsey Advisory Group analyst Joe Feldman said Best Buy has shown signs of stabilization as consumers begin to replace electronics they bought during the pandemic.
“In select categories, such as laptops, Best Buy has already seen a positive vibration due to the replacement cycle and this trend is expected to strengthen as the new technology back-to-school timeframe continues,” Feldman wrote in his note. comes to market around to investors. “Furthermore, product innovation is on the rise, such as Samsung's AI-powered phone, Microsoft's Pilot laptop, and 98-inch screen televisions, which will help drive growth.”
Best Buy's use of AI isn't limited to products. Later this summer, US consumers will be able to get help from a generative AI assistant online via a mobile app or over the phone. The assistant will be able to help customers with product issues, order delivery and more. Best Buy employees will also be able to use AI-powered tools to help customers over the phone, such as summarizing conversations and detecting sentiment. Store employees with AI-powered assistants can easily access company resources and product guides.
While Best Buy has invested in AI, it continues to be a lean company, and the retailer announced that it took $169 million in restructuring charges last quarter from employee layoffs. Expensed $15 million in related restructuring charges. Best Buy has said the layoffs are to align resources with where customers want to shop and right-size resources.
Best Buy has also shrunk its footprint. It closed 24 stores last fiscal year and plans to close 10 to 15 stores this year. Its U.S. store count has fallen from about 1,500 in fiscal 2014 to less than 960 as of this past quarter. The company said earlier this year that it would test opening smaller-format locations.
The retailer earned $246 million, or $1.13 per share, down less than 1% from the same quarter a year ago.