Best Buy has lowered its prediction for annual sales and profits, blaming rising inflation for reducing consumer spending on devices.
(AP) NEW YORK — The largest retailer of consumer electronics in the country, Best Buy, lowered its prediction for 2017 sales and profits on Wednesday, blaming rising inflation for reducing consumer spending on devices.
The Minneapolis-based business echoed Walmart, which claimed earlier this week that rising costs for essentials are causing consumers to spend less on discretionary items.
In after-hours trading on Wednesday, Best Buy shares decreased by more than 2%.
Best Buy reported that it now anticipates sales at locations that have been operating for at least a year to decline by 11%, a significant decrease from the 3% to 6% decline it had earlier predicted in May.
The company anticipates comparable sales to decline by 13% in the second quarter of its fiscal year. Nevertheless, it stated that revenue for the quarter should be about 7.5% higher than the second quarter of 2020.
Corie Barry, the CEO of Best Buy, said in a statement that the company expected its financial results to be lower than those of last year when consumer spending was boosted by government stimulus funding. However, increasing inflation has weakened consumer confidence, further reducing demand for consumer gadgets.
Best Buy’s chief financial officer, Matt Bilunas, said that it is challenging to predict how long the poor sales environment will last and how it will affect the company’s operations given the current state of the economy.
The Federal Reserve made its most aggressive effort in three decades to contain inflation on Wednesday by increasing its benchmark interest rate by three-quarters of a point for the second straight day.
Following the Fed’s action, its benchmark interest rate, which impacts a large number of consumer and commercial loans, will rise to a range of 2.25% to 2.5%, its highest level since 2018.
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