Price-Cutting, Higher Ad Costs Expected To Hit Best Buy's Q4 Operating Margin, Analyst Says
Wedbush Securities projected Q4 domestic comp store sales for Best Buy to fall to 0.8 percent, versus 2.8 percent last year, said analyst Michael Pachter in a research note Monday before the retailer’s Thursday release of its holiday sales data.…
Sign up for a free preview to unlock the rest of this article
Export Compliance Daily combines U.S. export control news, foreign border import regulation and policy developments into a single daily information service that reliably informs its trade professional readers about important current issues affecting their operations.
Best Buy “likely lost share in brick and mortar sales while improving its online sales,” said Pachter, saying operating margin was under pressure due to price-cutting and higher advertising costs to drive holiday traffic. Citing data from RetailNext, ShopperTrak and SpendingPulse, Pachter said brick-and-mortar retail sales fell 10 percent over the Black Friday weekend, while online sales were up 20 percent over the year-ago period. “We think Best Buy continued to benefit over the holiday as economic tailwinds persisted from low oil prices, new home starts, the RadioShack bankruptcy, and weakness at Sears,” said Pachter. But Best Buy likely lost some share from brick-and-mortar competitors while its online sales likely improved as retail sales continued a shift to online, he said. If Best Buy's overall domestic sales come in roughly flat as Wedbush predicts, “the company will have managed to come close to maintaining its share during a difficult quarter,” said Pachter. The analyst, which maintained a neutral rating for the retailer, expects a “reversal to share losses” in fiscal 2017 “when Best Buy faces difficult comps.”