Best Buy Q2 earnings top estimates, trims outlook

Best Buy's (BBY) second-quarter results topped analyst expectations for both revenue and earnings. The company also updated its full-year outlook in which it trimmed its revenue target to between $43.8 billion and $44.5 billion. Best Buy is expecting sales of electronics driven by replacement cycles to rebound, but not until next year. Yahoo Finance Live breaks down which sales categories are driving the changes at Best Buy.

RACHELLE AKUFFO: Well, Best Buy shares we're taking a look out this morning, as its second quarter results beat expectations for revenue and earnings, and comparable sales coming in at a narrower loss than expected. But the outlook is the key here. The company updating its full-year guidance, and lowering its revenue target to between $43.8 billion and $44.4 billion, as well as expecting a further drop in comparable sales, between 4.5% and 6%. But they did raise their EPS guidance for the year.

Now Brad, obviously we're coming at the tail end of what we're seeing with some of the consumer discretionary spending companies here. This was considered better than feared. But a lot of that softness that we saw in things like cell phones, appliances, home theater mobile phones. And the CEO also noting some of the trade off decisions that they're seeing customers making, and still expecting that softness to continue as well.

BRAD SMITH: Yeah, there are four key things that I took away from this one. They narrowed their guidance toward the lower end of the range, they're bringing that range closer together, but towards the bottom end, so that not good. Forecasting electronic stabilization by next year as well. And that's going to be driven by replacement cycles. That was at least part of the expectation that was also discussed with regard to where they're seeing some bottoming out in the demand profile right now.

And so, from a merchandising perspective, as well, one thing that did catch my attention was that the largest drivers of comparable sales declines on a weighted basis. It was appliance, it was home theater, it was computing, mobile phones. I think back to Jason Kelce's Eagles championship speech for the parade, saying, it's the whole team.

That feels like everything, appliances, home theater, computing, mobile phones. What's left out? Cameras, I guess. But, ultimately, at the end of the day, they did give me for some camera products.

But domestic online revenue, that was interesting to hear. That decreased by about 7.1% on a comparable basis, which perhaps could give you an inkling, or at least some type of thinking, into how consumers want to get their hands on the product before they're making a purchase, which would further lead to the thought that they're being extremely scrutinous with how they are spending right now. And so that discretionary spending certainly hitting the doors at Best Buy, and some of those aisles as well. And so what more they have to say on the call is going to be interesting to see if there's anything that crosses the wires around that too, Rachelle.

RACHELLE AKUFFO: It's true. And there were a few bright spots. When you look at product margin rates, those improved along with the financial performance from some of the company's membership offerings.

And, also, we saw that domestic gross profit rate, that improved 110 basis points to 23.1% of sales. So some bright spots, but still really not seeing much certainty from the consumer. The CEO noting the financial results better than expected, but they reflect a consumer electronics industry that remains challenged, expecting this to be the low point in tech demand after two years of sales decline.

So still seeing these trade-offs. And as we've noticed, some of these big ticket items consumers continuing to pull back from, saying, maybe I'll wait for the Labor Day sales, maybe I've bought everything I need to buy in terms of big ticket items when I have other expenses, and student debt repayments coming on deck as well, but it's just not what they're prioritizing right now.

BRAD SMITH: Yeah, I highly doubt if anybody is going back to school right now and just waiting for a Labor Day sale to hit, that they're going to skip their way into a Best Buy to try and pick up a big screen TV. However, I did have a roommate that bucked that trend in college, we won't go into his details. But, one way or another, I think for a lot of the retailers that are trying to make sure that they are discounting where appropriate, especially given the volume pullback that they are seeing, that they're not sacrificing margins tremendously. But that is unfortunately the case that is playing out with a lot of the larger appliance, or big ticket item retailers right now.

I'll just end with this quote here from Corie Barry, saying, "We continue to expect this year will be the low point in tech demand, after two years of sales declines. Next year the consumer electronics industry should see stabilization and possibly growth, driven by a natural upgrade and replacement cycles and normalization of tech innovation." Perhaps it's folding phones. Maybe folding phones will be all the rage.

And I don't know, maybe I'm still waiting for that roll-up television. We saw that at CES a couple of years back. So maybe that will be the tech innovation that will make its way into some living rooms, and dens, and whatnot.

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