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Gap beats earnings and revenue estimates, hikes profit margin…

29 August 2024
by admin

A Gap store in New York, US, on Monday, May 27, 2024.

Stephanie Keith | Bloomberg | Getty Images

Gap raised its full-year profit outlook on Thursday after seeing better-than-expected results at its largest brand, Old Navy.

The apparel company’s fiscal second quarter results were released earlier than planned after the company “inadvertently” posted them to its website and then removed them, a Gap spokesperson told CNBC.

“As soon as the error was caught, we notified the NYSE and trading of our stock was halted temporarily,” the spokesperson said, adding the results were posted “as a result of administrative error.”

Gap’s stock was halted just before 10 a.m. ET. The company then released its quarterly results at 11:12 a.m. ET. Following the release, shares rose more than 2% after being halted for much of the morning.

Here’s what the company reported, compared with what Wall Street expected, according to analysts surveyed by LSEG:

Earnings per share: 54 cents vs. 40 cents expected
Revenue: $3.72 billion vs. $3.63 billion expected

The company’s reported net income for the three-month period that ended Aug. 3 nearly doubled from the year-ago period. Gap posted earnings of $206 million, or 54 cents per share, compared with $117 million, or 32 cents per share, a year earlier.

Sales rose to $3.72 billion, up about 5% from $3.55 billion in the prior-year period.

For the full year, Gap now expects its gross margin to be 2 percentage points higher than the uptick of at least 1.5 percentage points it had previously forecast. It also expects its operating income to grow by about 50%. It previously anticipated it would increase by slightly more than 40%.

Over the last year, Gap has been working to turn around its business, reverse a sales slump and reclaim cultural relevance under the direction of CEO Richard Dickson — the former Mattel executive credited with reviving the Barbie empire.

Since Dickson took over, sales have started to turn around at the company’s four brands — Banana Republic, Old Navy, Athleta and its namesake banner — and the company is finding its voice again among its peers. Beyond sales and relevance, Gap’s profits and balance sheet have also improved significantly under Dickson. The company ended the quarter with $2.1 billion in cash, cash equivalents and short-term investments, an increase of 59% compared to last year.

The company’s second-quarter results didn’t blow away expectations, but are solid improvements from where the company was a year ago.

“We really concentrated on our strategic priorities, and the first priority has been about maintaining financial and operational rigor that is becoming, to the extent that we can define it, the fabric of how we work, and it’s reinforcing better processes and cultural accountability,” Dickson told CNBC in an interview.

“Reinvigorating our brands is enabled by financial and operational rigor, and you see it. You see it in the results, you see it in our stores. You see it on our sites,” he added.

“We’re building stronger brand identities. They’re supported by trend right products,” Dickson said. “We’re amplifying those through better storytelling. Our media mix has gotten much more innovative, and generally speaking, I’m proud of the brand’s portfolio work in the context of cultural relevance.”

During the quarter, comparable sales were up 3%, in line with the 3.1% growth that analysts had expected, according to StreetAccount. Its gross margin came in better than forecast at 42.6%, ahead of the 40.8% that analysts had expected, according to StreetAccount.

Here’s a closer look at how each brand performed:

Old Navy

Sales rose 8% to $2.1 billion, with comparable sales up 5%, better than the 4.3% growth analysts had expected, according to StreetAccount. The company has been working to improve its assortment and ensure that its value offering isn’t just low cost but also fashionable.

“We’ve been dialing up, if you will, our fashion quotient,” said Dickson. “Besides really driving a much more disciplined approach with financial and operational rigor, we’re now dialing up and seeing the results of our reinvigoration strategy.”

As consumers feel the brunt of inflation and high interest rates, many have traded down to cheaper options, and Dickson said Old Navy is seeing “growth across all income cohorts.”

“With a presumed flight to value, Old Navy is there with a welcome mat,” said Dickson. “We become the style authority and the brand in the value space, and so again, we’re concentrating on our strategic approach, our strategic priorities. I think we’re seeing the success of that.”

Gap

Revenue at Gap’s namesake banner rose 1% to $766 million during the quarter, with comparable sales up 3%, just shy of the 3.4% uptick analysts had expected. As Dickson looks to bring cultural relevancy back to the company, it has helped the company’s namesake banner grow sales, he said.

Banana Republic

Gap’s elevated work-wear line has dragged on the company’s overall performance. Both revenue and comparable sales were flat in the second quarter compared to last year, versus StreetAccount estimates of up 0.5%. The company said it is working to “improve its pricing and assortment” to turn around the brand’s performance.

“In some cases, we got too ahead of ourselves, and in other cases, we could add more value orientation to drive more scale,” Dickson said when asked what work the company is doing to improve pricing.

“Some of our new merchandising strategies include depth of product in store, finding that right mix, if you will. And last but not least, really improving fit, which is an important part of any brand, but in particular, has been a challenge in the women’s space in Banana Republic, where we’re really concentrating,” he said.

Athleta

Sales at Gap’s athleisure brand Athleta slid 1% to $388 million, with comparable sales down 4%. The results were not comparable to analyst estimates.

One of Gap’s strongest brands during the pandemic, Athleta had been on a downward trajectory and weighed heavily on the company’s performance until it appointed former Alo Yoga president Chris Blakeslee as its CEO last summer. Since then, Blakeslee has worked to improve Athleta’s assortment and has also worked to generate more excitement at the line with product drops and collaborations with athletes.

In a press release, the company said it expects Athleta to return to positive comparable sales growth for the remainder of the year.

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Science & Environment

Best Buy shares surge on profit beat and guidance…

29 August 2024
by admin

Best Buy raised its fiscal-year profit guidance Thursday after exceeding earnings and revenue expectations for the most recent quarter.

Shares of Best Buy jumped more than 15% in morning trading Thursday.

The retailer now expects to see full-year adjusted earnings per share in the range of $6.10 to $6.35, up from a prior range of $5.75 to $6.20. The company, however, lowered the top end of its guidance ranges for both full-year revenue and comparable sales.

“As we look to the back half of the year, we expect our industry to continue to show increasing stabilization,” Best Buy CFO Matt Bilunas said in the company’s press release.

Here’s how the consumer electronics retailer did for the period ended Aug. 3 compared with what Wall Street was anticipating, based on a survey of analysts by LSEG:

Earnings per share: $1.34 vs. $1.16 expected
Revenue: $9.29 billion vs. $9.24 billion expected

The company reported net income for the quarter of $291 million, or $1.34 per share, compared with $274 million, or $1.25 per share, a year earlier.

Net sales in the quarter dropped to $9.29 billion from $9.58 billion during the same period a year earlier.

Comparable sales declined 2.3% during the quarter, compared with a 6.2% fall a year earlier.

That drop in comparable sales was the company’s best result for the metric since the fourth quarter of fiscal 2022, CEO Corie Barry said on the company’s earnings call.

Barry said the industry is returning to growth, adding that Best Buy’s positioning within the sector is helping the retailer “to capture that growth trajectory.”

Best Buy has been in the midst of an attempted turnaround in response to a two-year sales slump. Discretionary merchandise retailers across the board have struggled with softer consumer demand in the wake of unusually high sales throughout the Covid pandemic and as consumers pull back due to elevated inflation.

As the much-awaited replacement cycle of pandemic-era tech purchases starts trickling in, the retailer is hoping to cash in through marketing and operational initiatives. Best Buy said in July that it would add trained sales teams to three key parts of its stores — computing, appliance and home theater — and kick off a marketing campaign that includes YouTube videos to draw consumer interest.

The company was also betting on a wave of new tech gadget debuts, such as a collection of new iPads launched by Apple in May and artificial intelligence-enabled laptops touted by Microsoft, to drive sales.

The company on Thursday posted comparable sales growth of 6% in the domestic tablet and computing categories. However, that was “more than offset” by declines in appliances, home theater and gaming, executives said.

Barry added that AI could continue to boost sales across categories over the next few years.

“We believe we are just at the beginning of the impact of AI on tech innovation and customer demand,” she said.

Best Buy has seen a doubling in the number of consumers choosing to trade in old electronics for new ones, which Barry said is “another indicator that people are wanting to renew and refresh” their current tech gadgets.

“We capitalized on demand driven by our customers’ desire to replace or upgrade their products, combined with new innovation,” Barry said during the company’s earnings call. “We see a consumer who is seeking value in sales events and one who is also willing to spend on high-price-point products when they need to or when there is new, compelling technology.”

Still, the consumer environment continues to be “unpredictable and uneven,” Barry said, citing the upcoming election and the holiday season.

“There’s probably an even greater risk that the consumer is a little bit unsettled” in the back half of the year, she said.

Science & Environment

Walmart says prices are coming down — except in…

15 August 2024
by admin

A customer pushes her shopping cart through the aisles at a Walmart store in the Porter Ranch section of Los Angeles.

Kevork Djansezian | Reuters

Prices of many groceries and other items have fallen at Walmart, according to CEO Doug McMillon.

Yet the leader of the nation’s largest retailer said Thursday that inflation “has been more stubborn” in one particular part of the store: The aisles that carry dry groceries and processed foods. Those include items like carbonated soft drinks.

On a call after the discounter posted second-quarter earnings, he said Walmart has pressured suppliers that stock its shelves to cut prices. But he called on those companies to do more.

“We have less upward pressure, but there are some that are still talking about cost increases, and we’re fighting back on that aggressively because we think prices need to come down,” he said.

Walmart’s overall inflation was flat for the quarter, and revenue growth came from selling more units, not charging higher prices, Chief Financial Officer John David Rainey told CNBC. But price dynamics weren’t consistent across products: prices continued to go up for dairy, eggs, sugar and meat, and leveled off or dropped for items including pet food, apples, potatoes, strawberries, sporting goods and lawn and garden items.

Walmart’s quarterly results sparked a rally of other retail stocks, including Target, Best Buy and Macy’s on Thursday. Both the big-box discounter’s results and better-than-expected retail sales numbers defied concerns of a consumer slowdown.

Walmart beat on the top and bottom line and raised its forecast to reflect a stronger first half of the year. Rainey told CNBC consumers have continued to be “choiceful, discerning [and] value-seeking,” but the company’s leaders “don’t see any additional fraying of consumer health.”

All consumer brands, including Walmart, have been under more scrutiny from shoppers and even politicians as frustration with pricier goods persists — and McMillon’s comments about Walmart’s suppliers underscore how much pressure grocers have faced. Walmart drew criticism on TikTok for rolling out electronic price labels for store shelves, with some users contending the company will use the technology to hike prices when demand spikes. (Walmart, for its part, has said it has no plans to change its approach to pricing and added the new price tags to save store workers’ time.)

Many brands have taken pains to emphasize value or roll out new deals, particularly as consumers get more selective about where they spend their dollars.

McDonald’s, for example, launched a $5 value meal in late June and decided to extend the offer in most markets. Target in late May said it would cut prices on about 5,000 frequently shopped items throughout the summer, such as peanut butter, milk and meat.

Walmart is also touting discounts. The retailer said it had 7,200 “rollbacks,” its term for short-term deals, across categories in the quarter that ended July 31. That number included a 35% year-over-year increase in the number of rollbacks for food.

While Walmart’s profits are growing faster than sales, McMillon said that’s because of growth outside of retail in higher-margin businesses like advertising — not higher prices on goods.

“We’re not raising prices. We’re lowering prices,” McMillon said. “We don’t want product margins to go up. When we talk about margin improvement in our company, it’s business mix.”

Science & Environment

Home Depot expects sales to weaken as consumers grow…

13 August 2024
by admin

Home Depot on Tuesday topped quarterly expectations, but cautioned that sales will be weaker than expected in the back half of the year as high interest rates and consumer uncertainty dampen demand.

The home improvement retailer said it now expects full-year comparable sales to decline by 3% to 4% compared with the prior fiscal year. It had previously expected comparable sales, a metric that takes out the impact of store openings and closures and other one-time factors, to decline about 1%.

Home Depot’s total annual sales will get a boost from its recently completed acquisition of SRS Distribution, a company that sells supplies to professionals in the landscaping, roofing or pool businesses. Total sales are expected to increase between 2.5% and 3.5% including a 53rd week in the fiscal year and approximately $6.4 billion in sales from SRS. Yet excluding sales from SRS, its new full-year forecast would have amounted to a revenue cut.

In an interview with CNBC, Chief Financial Officer Richard McPhail said Home Depot has contended with consumers who have a “deferral mindset” since the middle of 2023. Interest rates have caused them to put off buying and selling homes and borrowing money for bigger projects, such as a kitchen renovation.

Yet over the past quarter, he said surveys of customers and home professionals like contractors have captured another challenge: a more cautious consumer.

“Pros tell us that, for the first time, their customers aren’t just deferring because of higher financing costs,” he said. “They’re deferring because of a sense of greater uncertainty in the economy.”

Here’s what the company reported compared with what Wall Street expected for the three-month period that ended July 28, based on a survey of analysts by LSEG:

Earnings per share: $4.60 vs. $4.49 per share expected
Revenue: $43.18 billion vs. $43.06 billion expected

The company’s shares closed more than 1% higher Tuesday.

Home Depot kicks off a wave of retail earnings, as economists, investors and politicians pay close attention to the health of the American consumer and try to forecast the economic outlook, including the odds of a recession. Though inflation has cooled, higher prices – particularly for everyday costs like groceries, energy and housing – continue to frustrate customers. They’ve also become a major talking point on the 2024 campaign trail.

Consumer clues will keep coming this week and next, as Walmart reports earnings and the government shares retail sales numbers on Thursday. Other retailers, including Target, Macy’s and Best Buy, will also post results in the coming weeks.

Compared with many other retailers, Home Depot has a more financially stable customer base. About half of its sales come from home professionals and about half come from do-it-yourself customers. About 90% of those DIY customers own their own homes.

Yet Home Depot still felt the impact of consumer uncertainty, McPhail said. He said the company saw slower demand for a wide range of project-driven items, including lighting and flooring.

Home Depot’s net income for the fiscal second quarter decreased to $4.56 billion, or $4.60 per share, from $4.66 billion, or $4.65 per share, in the year-ago period.

Revenue rose slightly from $42.92 billion in the year-ago period.

Comparable sales dropped 3.3% in the quarter across the business and declined 3.6% in the U.S. That was worse than the 2.1% decrease that analysts expected, according to StreetAccount.

It marked the seventh consecutive quarter of negative comparable sales at Home Depot.

Shoppers visited Home Depot’s stores and its website less frequently, and spent less when they did, during the quarter compared to the year-ago period. Customer transactions fell nearly 2% and average ticket dropped slightly to $88.90 from $90.07 in the year-ago quarter

Consumers have postponed projects in part because of a widely anticipated rate cut by the Federal Reserve, McPhail said. In late July, Fed Chair Jerome Powell said policymakers could cut rates at the central bank’s September meeting if the data supports it.

That would lead to lower mortgage rates and borrowing costs for homeowners who want to tack on an addition or finance a project, such as a bathroom remodel.

“What our customers tell their pros is, ‘Everything I read tells me interest rates will be lower in three to six months,'” McPhail said. “‘Why would I borrow to finance the project now rather than just wait a few months?'”

Yet Home Depot leaders have emphasized home improvement’s bright long-term outlook, referring to the country’s aging homes, its shortage of houses and significant property value gains, especially during the years of the Covid pandemic.

And McPhail said most of Home Depot’s customers remain financially healthy and employed, even if they’re spending less on home improvement right now.

Shares of Home Depot closed at $345.81 on Monday. As of Monday’s close, the company’s shares are down less than 1% so far this year, trailing behind the S&P 500’s 12% gains.

– CNBC’s Robert Hum contributed to this story.

Science & Environment

Why ‘wardrobing’ retail fraud soars in the summer

7 August 2024
by admin

A particular type of retail fraud soars during the summer season.

“Wardrobing,” in which a shopper buys an expensive item, wears it with the tags on, and then returns the product for a refund, picks up as shoppers bolster their closets for summer vacations, according to returns management software company Optoro.

“During the summer and cruise season, from July to September, we see wardrobing and overall return rates spike by two-to-three times, with swimwear alone making up between 5% and 15% of returns,” said Amena Ali, CEO of Optoro. “This highlights the fine line between habitual returners and fraudsters.”

Forty percent of 18-to-29-year-olds wardrobe, according to Optoro data.

In a November 2023 Optoro returns survey, 30% of shoppers admitted to buying an item for a specific event, only to return it after the occasion ended.

The challenge for retailers is handling the items when they get them back.

“For seasonal items like cruisewear and swimwear, quick, yet thorough, inspection and restocking are imperative to retain as much value as possible before the season ends,” Ali said. “Time sensitivity is crucial in this fight – ideally, you catch fraud in the moment, or better yet, before it happens.”

Ali warned if products linger in the return process, the delay can lead to significant markdowns or the need to send items to secondary retail channels such as stores like TJ Maxx, discounters, or liquidators.

Ali told CNBC that when a wardrobed item returns to a store or warehouse, the best course of action depends on its value and condition.

“A $10 swim coverup returned in poor condition might not be worth the cost to clean or repair, and would likely instead be routed through recommerce, donations or recycling channels,” said Ali. “It’s imperative that items clearly worn for a summer vacation and returned don’t slip through the cracks to the next customer — protecting brand perception and customer loyalty is paramount.”

Scot Case, executive director of the Center for Retail Sustainability at the National Retail Federation, said wardrobing can drive up costs and waste for retailers if the product can no longer be resold. So retailers are taking action.

“Some retailers are addressing the issue by reducing the amount of time consumers have to return items, by eliminating free returns or by requiring consumers to return items in-store where an employee can examine the item before a consumer receives a refund,” said Case.

Companies like Best Buy, Gap and American Eagle Outfitters use Optoro’s reverse logistics artificial intelligence software to swiftly manage their returns, identify fraud and quickly restock products on store shelves to avoid discounting.

“Time is literally money,” Ali said. “The more quickly you can turn the product, the less likely you will need to discount it. Having a smart disposition system can recover costs and maximize profitability.

Stephen Lamar, CEO of the American Apparel and Footwear Association told CNBC that returns, whether due to wardrobing or other reasons, have become a key focus for retailers and brands, especially in the era of e-commerce.

“Supply chain technology, powered by AI, is increasingly being deployed so that consumers can find and enjoy the fashion they want at the right price, the right quality, and the right time,” Lamar said. “As companies build and integrate take back programs to repair and resell used items, returns take on a new role, fueling a new circular market.”

According to Optoro, 30% of the cost associated with a return is transportation. Strategies such as third-party drop-off locations and box-less, label-less returns are being used to cut down these costs.

“AI and software can reduce the number of touches on a returned product by 50%,” Ali said.

Ali said using AI in an end-to-end digitized return system can also help a retailer identify a trusted shopper and get the like-new goods identified and restocked at full price.

Optoro data shows approximately 95% of the goods that cannot return to resale go to a secondary channel. Five percent of products head to a landfill or for donation.

“We see a wide range of numbers in terms of recovery, between improvement of 5% to 45% in certain categories, depending on the brand, but this is significant money when talking to enterprise retailers,” said Ali. “A global shoe manufacturer that was sending a large portion of returned inventory to destroy/recycle, was able to increase their re-commerce to the secondary channels with an improved overall recovery for that segment by 45%.”

Optoro customers’ top three categories returned were kitchen and dining, men’s shoes and women’s clothing.

Return rates vary both in category and by brand or retailer. Some clients see as high as 40% return rates. Clothing leads the return category at a 25% rate, followed by bags, accessories and shoes at 18%, miscellaneous accessories at 13% and consumer electronics at 12%, according to Statista.

The average value of a returned item for Optoro’s customers is $85. The highest item value reported as returned in the survey was $200.

Correction: This story was updated to correct the spelling of Stephen Lamar’s name. A previous version misspelled it.

Science & Environment

Inside Best Buy’s push to get back to sales…

23 July 2024
by admin

Microsoft PCs on display at a Best Buy store in Secaucus, N.J.

Melissa Repko | CNBC

Best Buy on Tuesday announced new plans to try to reverse a two-year sales slump and cash in on a much-awaited replacement cycle of pandemic-era purchases and a fresh wave of innovation.

The consumer electronics retailer said it would add trained sales teams to key parts of its stores, create more YouTube videos to pique customers’ curiosity and kick off a marketing campaign with a fresh tagline: “Imagine that.”

In an interview with CNBC, CEO Corie Barry said customers told Best Buy that retailers’ store experiences and the technology they offer have “lost a bit of [their] sparkle.” She added the consumer electronics innovation has hit a dry spell.

“That is our big focus this year,” she said. “Getting all of that ‘new’ back in there.”

One of Best Buy’s major hopes to drive sales comes from artificial intelligence-enabled laptops and smartphones.

Still, the retailer doesn’t expect its sales to improve overnight. The company has reported 10 consecutive quarters of declining comparable sales, a key metric that takes out the impact of store openings and closures. Best Buy said in May that it expects comparable sales for the full year to be roughly flat or to drop by as much as 3% compared to the prior year.

Best Buy expects revenue to range from $41.3 billion to $42.6 billion, a decline from $46.3 billion last year. The range would put its revenue slightly below the $43.6 billion for the pre-pandemic fiscal year that ended in early 2020.

Barry said consumers are still “making very clear, value-based decisions.”

Shares of Best Buy have reflected the sales struggles: As of Monday’s close, the stock has fallen about 36% from its all-time high of $138, which shares hit during the Covid pandemic.

Steven Zaccone, an equity research analyst who covers retail for Citi Research, upgraded Best Buy’s stock from sell to buy in early June, in part due to an expected wave of new products.

But he acknowledged trends have become tougher to predict as consumers watch their wallets after the highest inflation in decades and get distracted by the uncertainty of this year’s presidential election.

“People who are focused on the near term would say the category is still declining,” he said. “So the call is based on the hope that you’re going to have a pivot to growth.”

Wearable tech on display at the Best Buy store in Secaucus, N.J.

Melissa Repko | CNBC

Rooting for a replacement cycle

Best Buy executives and investors have reason to feel optimistic. In each of the past two quarters, Best Buy’s laptop sales were higher than the year-earlier periods, early signs that a replacement and upgrade cycle may be starting.

Last week, shoppers’ purchases of consumer electronics like tablets, TVs and Bluetooth speakers helped drive sales to a record $14.2 billion across U.S. retailers’ websites during Amazon’s two-day Prime event, according to Adobe Analytics. It was a shift from last year when shoppers worn down by inflation took advantage of deals on household essentials. (Best Buy is among the retailers that have participated in the Amazon-created retail holiday by offering up its own deals.)

Best Buy’s ability to drive sales partly depends on its vendors. It’s been hungry for innovation that gives customers fresh reasons to come to its stores or website.

Over the past few months, Apple, Samsung and Microsoft have announced fresh launches that could create hype and drive customer traffic. Apple launched a collection of new iPads in May. Earlier this month, Samsung debuted its first “smart rings” with health-tracking features to compete with Oura’s own ring and Apple’s watch.

Elsewhere, Microsoft announced a collection of new PCs in May that include Copilot, an artificial intelligence-powered chatbot. The collection, which includes roughly 40 different items with about 40% exclusive to Best Buy, began to get delivered in mid-June.

Barry said the retail chain will benefit as customers see those leaps in technology and stores offer entirely new lines of business like rings that can track sleep, physical activity and more.

“Five years ago, we would have never carried jewelry in our stores and now we’re going to have a whole section of wellness-oriented products that you can wear in really unique ways,” she said.

Best Buy is kicking off a new marketing campaign this back-to-school season, which features a “spokeshologram” named Gram and a new tagline “Imagine that.”

Courtesy: Best Buy

Less tech specs, more discovery

Instead of rattling off TV and laptop dimensions, Best Buy staff will instead focus on helping customers understand how items can save them time or make life easier, Barry said.

At stores, customers will see more experiential displays that show off products including Tesla chargers, GoPro video equipment and Lovesac’s furniture later this summer. It will also add dedicated teams to its computing, appliance and home theater parts of the store, three key areas where Barry said customers tend to need support.

Barry said those store employees will underscore unique features that customers may not know about, such as a laptop with more than double the battery life, a washer/dryer combo that allows them to do two laundry loads at once or a home theater system that can make a workout space feel like a spinning studio.

On Best Buy’s app, customers will see a personalized home screen, a new “Discover” tab and an ability to set alerts for when an item on their wish list goes on sale.

The company plans to roll out more than 500 videos by the end of year on its YouTube channel, app and website. That’s triple the number that it added last year.

And as it gears up for back-to-school season, Best Buy will run advertising spots online, on streaming services and on social media that feature a “spokeshologram” named Gram.

“We are absolutely doubling down on what makes us different and I think we’re the only ones to kind of help bring that ‘What if?’ question to life for our customers,” Barry said.

Yet, Best Buy will be rolling out this sharper customer strategy on a tighter budget. Barry said on the company’s earnings call in May that the retailer plans about $750 million in capital expenditures this fiscal year, about $50 million less than last year. It is cutting spending with “refreshes” of all of its approximately 900 U.S. stores instead of major remodels and new store openings, she said.

The company’s dedicated teams in part of the store will be made up of its existing workforce and supplemented with employees from its vendors, she told CNBC.

A Best Buy store in Woodbridge, Virginia, US, on Tuesday, May 21, 2024.

Nathan Howard | Bloomberg | Getty Images

‘Murphy’s law of headwinds’

Best Buy has faced a “Murphy’s law of headwinds” over the past three years, said Scot Ciccarelli, an equity research analyst at Truist Securities, referring to the adage that “Anything that can go wrong will go wrong.”

Among the company’s challenges, consumers have pulled back on pricier purchases like smartphones as everyday costs like food, gas and rent have gone up. Slower turnover in the housing market fueled by higher interest rates has dampened demand for home-related purchases like a bigger TV or new kitchen appliances.

But Ciccarelli said Best Buy’s unusually high sales during the pandemic have haunted the retailer the most. It threw off the typical cadence of shoppers replacing smartphones, laptops, home appliances and more, since many of them bought that tech when setting up their home offices, gyms and kitchens during the Covid lockdown.

Plus, as consumer electronics brands contended with temporarily shuttered factories and clogged supply chains during the pandemic, they debuted less game-changing tech. Without those advancements, Best Buy has been stuck competing on price as it sells roughly the same devices as competitors like Amazon and Walmart, particularly if customers have little reason to touch or feel a product before buying, Ciccarelli said.

Consumer electronics have been a weaker category of retail, as sales had fallen 4% in dollars and 5% in units year to date as of the end of June compared to the year-ago period, according to Circana, a market research firm that tracks point-of-sale data across major U.S. retailers. The market research firm’s definition includes most major devices like TVs, tablets and audio equipment, but excludes some categories that Best Buy sells, like home appliances.

However, consumer electronics spending is up 5% this year compared with the same pre-pandemic period in 2019, according to Circana.

Some of increase comes from higher prices of computers, TVs and other items, said Paul Gagnon, consumer technology industry advisor for Circana. For example, he said the average price spent on items in the headphones category has jumped 60% compared with 2019 as customers gravitated toward wireless ear buds like Apple’s Airpods or headband-style wireless headphones.

Consumer electronics’ biggest sales season is still ahead. About 57% of the category’s sales have historically come in the second half of the year, according to Circana data.

And the biggest days for consumer electronics are still ahead in the back-to-school and holiday seasons.