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Money News

Best Buy warns of profit, sales hit on coronavirus fallout

(Reuters) - Retailer Best Buy Co Inc forecast largely lower-than-expected annual profit and sales on Thursday as electronics makers curb manufacturing due the coronavirus epidemic, sending the shares down 4%.

The tepid forecast overshadowed robust online demand for smartphones and tablets during the crucial holiday season that helped the company beat quarterly profit and sales estimates.

In mainland China, electronics manufacturers are grappling with a logistical nightmare as many of the workers they depend on cannot return to work, hindered by travel and quarantine restrictions.

Earlier this month, Apple Inc said manufacturing facilities in China that produce its electronics were ramping up more slowly than expected, after the virus outbreak forced them to temporarily shut down operations.

“This is a very fluid situation, which makes it difficult to determine exact financial impacts from disruptions in supply chain,” Best Buy Chief Executive Officer Corie Barry said.

The company forecast fiscal 2021 adjusted earnings per share of $6.10 to $6.30, largely below expectations of $6.25. It expects same-store sales growth of flat to 2%, compared with expectations of a 1.9% rise, and said this reflects its best estimate of the coronavirus impact.

In the fourth quarter, Best Buy’s overall same-store sales rose 3.2%, beating analysts’ average estimate of a 1.9% increase, according to IBES data from Refinitiv.

The company has proved to be an outlier among big retail names such as Walmart and Target as investments to beef up its e-commerce business helped it benefit from a record online shopping during the holiday season.

The consumer electronics retailer has tweaked the appearance and features of its app and added next-day delivery and pick-up-in-store services.

The company’s domestic comparable online revenue increased 18.7% to $3.52 billion in the quarter ended Feb. 1.

“Given that Target called out electronics as a weak area, the Best Buy results come as something of a relief,” Jason Benowitz, senior portfolio manager at Roosevelt Investment Group said.

“The company’s investments in online and mobile commerce clearly bore fruit in the quarter.”

Revenue rose 2.7% to $15.20 billion, beating the estimate of $15.05 billion.

Excluding one-time items, the company earned $2.90 per share, ahead of expectations of $2.75 per share. Net profit rose 1.4% to $745 million in the quarter.

Reporting by Uday Sampath in Bengaluru; Editing by Saumyadeb Chakrabarty and Arun Koyyur

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