Published on March 2nd, 2023
Best Buy expects sales will dwindle this year as cash-strapped consumers shun big-ticket home electronics.
“As we enter FY24, the consumer electronics industry continues to feel the effects of the broader macro environment and its impact on consumers,” Matt Bilunas, the retailer's finance chief, said in an earnings report Thursday (March 2).
“As a result, our outlook assumes comparable sales decline 3% to 6% for the year, with the most sales pressure in the first quarter, as year-over-year comparisons ease through the year.”
The report shows domestic sales declines in the company's three largest categories: computing and mobile phones (down 10%), consumer electronics (11.8%) and appliances (13.2%).
In the year ahead, the company said it expects its membership program to help drive profits as it tries to evolve that service.
“Members are engaging more frequently with us and shifting their share of wallet to Best Buy,” she said, adding that “nearly half of the new members joining the program in the past year were either new or lapsed customers, reinforcing that the value of Totaltech resonates beyond our existing loyal customers.”
One of the challenges Best Buy and other retailers face now is continued pressure on consumers who feel like they can't afford inessential items as inflation eats away at their disposable income.
According to “New Reality Check: The Paycheck-to-Paycheck Report: The Economic Outlook and Sentiment Edition,” a PYMNTS and LendingClub collaboration, the rise in the number of consumers living paycheck to paycheck has led to more people rethinking big-ticket discretionary purchases for 2023.
“With inflationary pressures dampening their optimism, many consumers are likely to shy away from large purchases in 2023, primarily electronics, appliances, and leisure travel,” the study said. “Only 35% of consumers said they will incur leisure travel expenses in 2023, and just 24% plan to purchase expensive electronics or appliances in 2023.”
As PYMNTS research has found, the yearly cost of essentials like shelter, food and clothing grew by nearly 20% between the last quarter of 2019 and the same period in 2022. Drilling down somewhat, the research shows that spending on food has jumped 25%, while the amount people spend to keep a roof over their heads has risen 17%.
Pressure on consumers has led more than two-thirds of consumers to alter their shopping habits, PYMNTS wrote, “in a trade-off that focuses on quantity over price and quality.”
For example, of the more than 2,100 consumers surveyed by PYMNTS, 59% said that they have cut back on non-essential grocery items, and 35% said they went with cheaper alternatives.
For all PYMNTS retail coverage, subscribe to the daily Retail Newsletter.