Big box retailer Best Buy announced a beat on its earnings, and Katie Thomas, lead at Kearney Consumer Institute, joined Cheddar News to discuss the electronics giant's report and forecast how it's weathering the tidal wave of e-commerce. "I think they'll continue to diversify and really figure out what consumers are looking for from that broader home electronics and entertainment segment," Thomas said. "So, there's a lot of opportunities to consider what that looks like for them."

Opening Bell

Best Buy Beats on Earnings Despite Sales Drop

Katie thomas lead Carney, Consumer lead at the Karni Consumer Institute, Katie want to get your read on best buy, best buy. You know, I'm curious how do you think it's best position to weather the storms when it comes to slowing down on the consumer electronics and again slowing down, Especially when you look at comparables of last year and the year before last, we were pivoting fully into this hybrid or fully remote work model. Absolutely. Alicia Well, I think that's what drives a lot of what you're seeing is that they're laughing some pretty tough gains from last year as we're all still stocking up on that technology that we needed at home. We saw in the most recent retail numbers that electronics were already down. Best buy flag that when they modified their forecast for the remainder of the year. So I would say these numbers aren't that unexpected. We've been seeing it really across these highly discretionary categories, where consumers really leaned in during the pandemic. So outside of electronics, we've seen it in subscription services, whether it's streaming or boxes, we've seen it in at home fitness. It's really consumers thinking about where they spent a lot of money during the pandemic and how they're shifting that either just, you know, paying more for food and gas or to do things that are more experiential that they weren't doing during the pandemic, When you look at categories for best buying opportunities? I'm curious do you expect best buy to kind of lean more into the internet of things or smart home category as it continues to try and you know, show growth moving forward. Absolutely. I think they'll continue to diversify and really figure out what consumers are looking for from that broader home electronics and entertainment segment. So there's a lot of opportunity to consider what that looks like for them. As you just mentioned. I think what we'll see them start to do some of that is during the holiday season. So we are in a bit of a lull where you may need elect you simply are looking for electronics whereas that's a category that starts to do really well as you approach the holiday season. So come even october this year I think they'll start with the core focusing in on some of those traditional big ticket items such as tv speakers, items like that and that will allow them to continue to experiment and see what else is working in other categories, you know, inflation more broadly in the broader retail earnings picture has been obviously a key, you know, buzzword and a lot of retailers signaling their customers are feeling the pressure when it comes to inflation best buy even, you know, doing that in its latest earnings report, Best buy is quarterly results. The sharp change in the consumer habits at that point. Do you think this is a market correction as we kind of distance ourselves from pandemic related spending habits or do you think this is strictly inflationary and as that eases up potentially there is a kind of you know runway for for a name like best buy. I would say this is a bit more of a market correction. So again, you know, a couple of months ago we were talking a lot about how despite consumer sentiment numbers being low despite raising prices, consumers weren't pulling back and spending yet. We've seen that sort of hit its tipping point in the last month or two and across income segments as well. Again, initially in the beginning you saw lower income folks pull back pretty quickly whereas higher income was still spending then even walmart in their most recent earnings said, hey, we have higher income folks that are coming into the store more as well trying to get the best bang for their buck on the everyday items. So I think it really is. Um, you know, coming out of the pandemic, consumers work spending as freely as they wanted to despite inflation. And now you're seeing that stabilize a bit, I wouldn't say it's a major red flag as we think about consumer segments and categories overall. Do you think we see any long term consumer behaviors more broadly in the electronic space? Well, I think we'll continue to evaluate what works in terms of these hybrid working environments. And you know, for the most part we've seen Children go back to school. So that's one element of it. But I don't think we'll be so pronounced. But I think a lot of us thought more people would be back in the office by now and you can continue to get pushed back from consumers and not wanting to go back full time. So that's really if I were best buy, that's what I'd be thinking about or what are some of those areas where we can still continue to drive sales and revenue by helping people make that sort of hybrid environment work better with that in mind then, you know, the reality that things have shifted so dramatically, you know, since the pandemic and there's more of this hybrid work environment that employers are becoming more and more okay with and that employees certainly, you know want more and more of what does this change in behavior and habits say for the broader retail tech space at large in terms of the long term future here, there's still a lot of opportunity to figure out how we can make these experiences better and more frictionless. I think we were forced to adapt so quickly but also showed the power of consumer behavior change. So I don't know about you all but I had never really been on video chats regularly prior to the pandemic and we realized that it's actually a great modified option and we figured out how to make it work. I think we'll continue to see companies experiment that's even where some of the new technologies such as the metaverse could come into play. There's a lot of great things they're experimenting with in terms of corporate training or holding meetings that feel more of that augmented reality hybrid option, so that some of the more long term elements. But I think we'll see companies really continue to investigate Katie, really appreciate your time and your insight, Katie thomas lead at the Karni Consumer Institute.