Best Buy forecasts upbeat sales as AI gadgets boost demand; shares rise
Best Buy's Strong Performance and Future Outlook
By Savyata Mishra
May 28 (Reuters) - Best Buy on Thursday forecast second-quarter sales above Wall Street estimates after beating quarterly expectations on steady demand for AI-powered smartphones and gaming consoles as well as growth in its ads and marketplace channels.
Shares of the U.S. electronics retailer surged 18%. They are down about 10% over the past 12 months.
Growth Driven by AI and Innovation
Best Buy is doubling down on fast-growing categories such as AI glasses, 3D printers and collectibles, while continuing to partner with companies including OpenAI and Google to capture tech innovation, the company said.
May sales rose at a high-single-digit pace but are expected to slow to about 1% in the current quarter following last year's strong Nintendo Switch 2 launch. The outlook is still stronger than analysts' expectation of a 0.4% decline.
Consumer Trends and Spending Patterns
Shoppers remain selective on big-ticket purchases amid concerns over rising fuel costs, but are still willing to spend on higher-priced products prompted by replacement needs or new technology.
Inventory and Supply Chain Management
Executives "dispelled any concerns about inventory supply" from memory chip shortage, Citi analysts said in a note, after pulling forward imports during the quarter as a global shortage tied to AI-led demand lifted component prices.
"At this point, we do not see indications of material inventory supply constraints for the rest of FY27," CFO Matt Bilunas said in a post-earnings call.
The company expects only limited demand impact from the resulting product price hikes in the current quarter as customers adjust purchases across price tiers to stay within budget.
Shift to Higher-Margin Businesses
Leadership and Strategic Focus
Bonfig, who will succeed current CEO Corie Barry in November, outlined plans to sharpen focus on the company's retail, media and technology platform, expand its reach through marketplace offerings and enhance the customer experience.
AI Hardware Upgrades and Industry Trends
The next 12 months could prove to be a sweet spot for AI-driven hardware upgrades as early-generation AI PCs come down in price, said Michael Ashley Schulman, partner at Cerity Partners.
A day earlier, HP said AI PC shipments are increasing rapidly, now marking up 44% of its total PC shipments in the second quarter, a significant rise from more than 35% in the previous quarter.
Financial Forecast and Performance
The retailer maintained its fiscal 2027 forecast of comparable sales in the range of a 1% decline to a 1% rise, with adjusted profit per share between $6.30 and $6.60.
Comparable sales rose 2% in the quarter ended May 3, rebounding from a 0.7% drop a year earlier and above analysts' expectation of about 1%, according to data compiled by LSEG.
Best Buy reported profit of $1.28 per share, compared with $1.15 per share a year ago, and beat analysts' estimate of $1.23 per share.
(Reporting by Savyata Mishra in Bengaluru; Editing by Pooja Desai)
