Weak demand for consumer electronics, Best Buy (BBY.US) cuts full-year guidance

Best Buy (BBY.US) has cut its full-year same-store sales guidance, a troubling sign for the retailer that is hoping to turn around its fortunes, as demand for electronics and other appliances remains weak.

The company now expects same-store sales to decline 2.5% to 3.5%, down from its previous guidance of 1.5% to 3%. It expects revenue to be $4.11 billion to $4.15 billion, down from its previous forecast of $4.13 billion to $4.19 billion.

Adjusted EPS is expected to be $6.10 to $6.25, down from the previous forecast of $6.10 to $6.35.

The stock was down more than 7% before the market opened on Tuesday. Shares have risen 19% so far this year, while the S&P 500 has risen 26%.

Despite easing inflationary pressures in the U.S., consumers are still reluctant to spend on high-priced electronics and are waiting for discounts and promotions before making purchases.

As a result, retailers such as Best Buy and large store operators like Target (TGT.US) have struggled to restore sales in non-essential categories and have had to rely heavily on discounts.

“The continued macroeconomic uncertainty, consumer waiting for discounts and promotions, and the distraction of the election in the back half of the quarter” kept customers on the sidelines, Best Buy CEO Corie Barry said in a statement.

Third-quarter net sales fell to $9.45 billion from $9.76 billion in the year-ago period, while analysts had expected $9.63 billion. Adjusted EPS was $1.26, below the consensus of $1.29.

Same-store sales fell 2.9%, with a 2.8% decline in the U.S. market.

Best Buy said that softness in home appliances, home theater and gaming contributed to the decline in same-store sales, but was partially offset by growth in the computer, tablet and service categories.

Digital sales were also weak, down 1% in the U.S. market.

However, Barry added that demand had picked up as the holiday season sales began and the election ended.

“We still see consumers looking for value and promotions, and they are willing to spend on high-priced products when they need or have new, compelling technology. So we are balancing our optimism about the industry and our unique positioning, and taking a pragmatic approach to address potential imbalances in customer behavior in the future,” she said.