NEW YORK (AP) — Best Buy reported lagging sales in the fourth quarter and delivered a weak outlook as the nation’s largest electronics chain grappled with a shortage of popular items like drones and tablets that is expected to continue well into this year.
Sluggish demand for smartphones and a muted reception for wearable devices also hurt Best Buy’s business as well.
Same-store sales, a key indicator of a retailer’s health, fell 0.7 percent overall, short of expectations. That figure actually dipped 0.9 percent in the key North American market, a bad sign for the company.
The consumer electronics company expects same-store sales to fall 1.5 percent to 2.5 percent in the first quarter. It also gave a weak profit outlook for the first quarter and expects revenue to be flat for the year.
Shares fell $2.02, or 4.3 percent, to $44.13 in trading Wednesday.
Best Buy Co. has been facing pressure from Amazon and other retailers. It has spent the last several years cutting costs and beefing up its web presence and services to better compete in a sector increasingly dominated by online sellers. Best Buy has also been rolling out dedicated spaces for TVs in the higher-quality format known as 4K. And the company has been shipping goods from all of its stores, which means speedier deliveries.
While the company has made inroads, the sales pace has been uneven. The latest industrywide shortages didn’t help. Best Buy had estimated it expected to take a hit of $200 million in sales due to Samsung Electronics Co.’s massive recall of its Galaxy Note 7 smartphone. But CEO Hubert Joly told investors the chain was also affected by widespread shortages in categories that ranged from tablets to wearable to computing devices.
“While we’ve experienced constraints on product availability before, the situation felt unprecedented given how widespread these issues were,” Joly said.
Another issue that hurt the latest quarter was weak gaming demand.
Neil Saunders, managing director of research firm GlobalData Retail, cited stiff competition from Amazon and Apple that bit into Best Buy’s business. He noted that before Christmas, Amazon pushed its own lineup of devices and often used deep discounts to attract shoppers.
Richfield, Minnesota-based Best Buy earned $607 million, or $1.91 per share. Earnings adjusted for one-time gains and costs came to $1.95 per share, topping Wall Street expectations. But revenue fell 1 percent to $13.48 billion in the period, missing Street forecasts. For the year, the company earned $1.23 billion, or $3.81 per share. Revenue came to $39.4 billion.
For the quarter ending in May, Best Buy expects per-share earnings of 35 cents to 40 cents. That’s far short of expectations for 49 cents per share.
The company also announced a $3 billion share repurchase plan expected to be completed over the next two years and a 21 percent boost to its quarterly dividend, bringing it to 34 cents per share.
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