While consumers may be cutting their discretionary spending, not all gadgets these days are discretionary — and for many households, that now includes flat-screen TVs and laptop computers. That’s one lesson from Best Buy’s earnings report Mar. 26, which beat Wall Street’s expectations and pushed the electronics retail chain’s stock up 12.6 percent, to 37.67. Analysts said that might offer some hope that consumers are beginning to spend again.
Many shoppers slashed all but necessary purchases last fall as they watched the stock market tumble and job losses mount. The paring back extended through a dismal holiday sales season and helped drive Best Buy competitors, such as Circuit City and Tweeter, out of business.
Excluding one-time restructuring charges that amounted to 26 percent per share, Best Buy earned $682 million, or $1.61 per share, in the quarter ended Feb. 28. Analysts surveyed by Thompson Reuters had predicted $1.40 a share. Including the one-time charges, profit fell 23 percent, to $570 million, or $1.35 per share, compared with $737 million, or $1.71 per share, a year earlier. Best Buy — which alarmed investors last November with a dire report on consumer cutbacks — also provided a better-than-expected outlook for the rest of the year.
Gains for Notebooks, Flat-Screen TVs
Analysts say the results show that the sales dip has begun to level off, and demand for electronics — albeit diminished — remains steady. “You’re basically looking at an industry that’s about 20 percent smaller than it was a year ago in terms of sales,” says Michael McNamara, vice-president at MasterCard Advisors SpendingPulse, which tracks retail spending. “One theory is that [shoppers have] made the discretionary cuts, and now we’re in a more stable environment.”
Best Buy was apparently caught off guard by how resilient sales would be. “It’s challenging to accurately gauge the level of demand,…