Shares of electronics retailing giant Best Buy are getting hammered in pre-market trading Thursday after the company said that pricing pressures and sluggish post-holiday demand will likely cause a sales slump in the first half of 2015.
The company noted in its statement Thursday morning that deflationary pricing, weak demand for some electronics and less interest in extended warranties were likely to negatively impact the firm’s results. Best Buy said that sales in the first half could be changed to down by the low single digits.
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Relatively strong holiday season for Best Buy
Today’s negative guidance comes following a 2.6% gain in U.S. same-store sales for Best Buy for the holidays. The firm said the strong sales were related to customer interest in and purchases of big-screen TVs and phones. The company also touted its multichannel strategy, allowing you to order online and pick items up in the store, as another factor in its improved sales. That said, the trend does not seem to be continuing into the new year.
The smartphone and home-theater improvementss “were partially driven by the excitement around high-profile products and will not likely continue at holiday levels,” CFO Sharon McCollam noted in the statement.
Of note, the growth in the 2014 holiday season compared with a 0.9% decline in 2013.
Moving beyond cost cutting
CEO Hubert Joly has been working to reduce expenses after taking the CEO job in 2012, but he has also remained focused on reviving Best Buy’s sales given tough competition from both online and big-box rivals. As part of its new strategy, the company has been giving more floor space to big name electronics brands like Samsung Electronics and Sony as well as major promotion of ultra-high-definition TVs. The electronics retailer also announced late last year that it was working with GoPro to add more of the firm’s “go anywhere” video cameras to its offerings.
Best Buy’s statement noted that it is making great efforts to overcome the current industry challenges by improving the customer experience, increasing sales incentives and continuing to invest in growth opportunities.