Best Buy slides 9% on weak holiday sales and soft 2022 revenue guidance

• Best Buy shares hit an intraday low of $103.39 in heavy volume after the retailer’s fourth-quarter report. 
• The company’s quarterly revenue of $16.9 billion fell short of expectations of $17.2 billion. 
• Jefferies says Fry’s Electronics closing shop could bring $400 million in sales for Best Buy. 
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Best Buy stock slumped Thursday, hurt by fourth-quarter revenue that fell short of Wall Street’s target and the electronic retailer’s outlook for a potential decline in same-store sales in the current quarter.

Revenue was $16.94 billion for the period ended January 31. That result missed expectations of $17.2 billion but was higher than $15.2 billion in revenue generated in the same quarter last year.

Demand for technology “remains at elevated levels” at the start of fiscal 2022 but the company said there’s also still significant uncertainty about how customer trends will develop with the COVID-19 pandemic still ongoing. It forecast a decline of 2% to growth of 1% in comparable sales for the fiscal year.

Shares slumped as much as 9% with an intraday low of $103.39 then trimmed the loss to 5.8%. Volume was heavy, with 4.1 million shares traded to outpace average daily volume of 3.04 million.

The same-store sales outlook “assumes that customers resume or accelerate spend in areas that were slowed during the pandemic, such as travel and dining out, in the back half of the year,” said Best Buy in its earnings statement.

Adjusted earnings for the fourth quarter were $3.10 per share, beating Wall Street’s projection of $3.45 per share. The adjusted earnings rose from $2.84 per share a year earlier.

What could help sales for Best Buy, said Jefferies on Thursday, is the bust-up of Fry’s Electronics which on Wednesday said it was closing its 31 stores in nine states after nearly 36 years in business.

“[We] believe the total dollar share clinched by Best Buy could be in excess of $400 million. We reiterate our Buy-rating on shares,” said Jonathan Matuszewski, a consumer analyst at Jefferies, in a note to clients.

Matuszewski said the estimate was based on its overlap analysis that suggested an average of two Best Buy stores within a 15-minute drive of Fry’s locations, with more than 20% of markets having three to four Best Buy stores in close proximity. Fry’s said it is shutting its doors “as a result of changes in the retail industry and the challenges posed by the COVID-19 pandemic.”

Best Buy’s stock has risen roughly 7% this year and has logged a 12-month rise of 36%.