Best Buy on Wednesday reported better-than-expected profit for the fourth quarter but weak sales drove its shares down more than 4%.
The retailer’s same-store sales dropped 0.7% for the three months ended Jan. 28, which includes the critical holiday season. Analysts had expected an increase of 0.5%.
Best Buy attributed the decline to “unprecedented product availability constraints across multiple vendors and categories” and “considerably weaker-than-expected demand in the gaming category.”
Cost-cutting helped Best Buy post a 27% increase in net income to $607 million and its adjusted earnings of $1.95 per share beat Wall Street estimates by 28 cents. But its shares fell 4.5% to $42.14 in trading Wednesday.
“Our strong bottom-line performance in the fourth quarter was driven by a disciplined promotional strategy, continued optimization of merchandise margins and strong expense management,” Best Buy CEO Hubert Joly said in a news release. “Domestically, we continued to gain share across the majority of categories and we believe, in aggregate.”
As USA Today reports, the earnings report showed that slumping sales of gaming products, tablet computers, wearables, and mobile phones offset encouraging results for connected home devices, headphones, computing devices, and home theater.
Best Buy’s overall revenue fell to $13.48 billion from $13.62 billion, missing analysts’ estimate of $13.62 billion, according to Thomson Reuters I/B/E/S.
“We think lackluster mobile, some product outages, and worse gaming (in a quarter that matters) are the forces at work — not a sudden shift to a less relevant [Best Buy],” Consumer Edge Research retail analyst David Schick told Reuters.
For the current quarter, Best Buy is expecting same-store sales to drop 1-2%. Analysts were expecting an increase of 0.7%, according to Consensus Metrix.
“With fewer planned cost cuts and innovative new electronics on the horizon, analysts have voiced concerns that 2018 could be a tough year for Best Buy, which has relied on buybacks to drive earnings per share growth,” Reuters reported.