Best Buy Co. Inc. forecast fourth-quarter comparable sales below analysts’ estimates on Tuesday, as the electronics retailer braces for a hit from likely product shortages during the crucial holiday shopping season.
The company’s shares, which have gained nearly 40 percent this year, fell 11.2 percent to $122.55 in premarket trading.
Retailers are under tremendous pressure to keep shelves stocked for the holiday season as shipping logjams, shuttered factories in Asia, and a scarcity of raw materials rip through global supply chains.
A shortage of semiconductor chips used in electronic items has dented the availability of some high-demand products, including the latest gaming consoles from Sony Corp. and Microsoft Corp.
Some analysts have also warned that supplies of Apple Inc.’s latest iPhones could take a hit during the holiday season.
IPhones and new gaming consoles are hugely important for Best Buy as they not only sell in large numbers, but also act as magnets for customers who often spend on other products.
“Getting hold of Apple’s latest iPhone or its new laptops is very challenging. These items should, in theory, be providing a nice lift to sales as the holidays approach, but stock levels remain low,” Neil Saunders, managing director of research provider GlobalData said.
The anticipated supply issues led Best Buy to include easier access to the holiday season’s “hardest-to-find” products as a perk in a new $200-a-year membership program launched last month.
However, costs related to launch of the program and increased expenditure to expedite some shipments have taken a toll on the company’s profit margins, mirroring issues seen at other retailers including Walmart Inc. and Target Corp.
Best Buy forecast fourth-quarter comparable sales between a fall of 2 percent and a rise of 1 percent, the mid point of which is below estimates of a 0.1 percent rise, according to IBES data from Refinitiv.
By Uday Sampath Kumar