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Best Buy stock dips as the retailer cuts profit outlook

Yahoo Finance Live anchors discuss Best Buy stock as the company cuts its profit.

Video Transcript

[MUSIC PLAYING]

- Welcome back to "Yahoo Finance Live," everyone. Shares of Best Buy moving this morning after the electronics retailer cutting its outlook for profit and sales over rising inflation. Taking a look at shares here, they're moving lower by about 2.7% right now, Soz.

- It's not that big of a move.

BRIAN SOZZI: Well, I would say this is bad buy. It's just a bad quarter, a bad preannouncement. But look, Best Buy saw an opportunity to get under the cover of Walmart early in the week and their massive profit whiff. But here's another-- bunch of executives and bunch another retailer that badly overestimated demand in the second quarter, and now they're going to pay for it.

So second quarter, same-store sales for Best Buy seen declining 13%. Previously, they were looking for an 8% decline. They provide that guidance in late May. So you could see, really get a sense of how things have deteriorated in just a few months. Looking for operating margins, 3.7%, they were at about 6.9% before.

Also took down their full year guidance, but maybe not as much as they should have. So they see full year operating margins at 4%. Previously, they were in a range of 5.2% to 5.4%. But they did note-- And we talk a lot about inventory. They noted inventory will end the second quarter flat or unchanged over year.

But their same-store sales fell 13%. The quick read is there. They're still sitting on a ton of inventory like many other retailers that's going to have to be marked down, could be marked down to the fall. The stuff's likely to be sticking around to the holiday season. Maybe margins are at risk. Maybe this is not the first warning-- not the last warning from this company.

- Yeah. It's interesting, as I said, to only see the shares down a little less than 3%. Contrast that with what we saw from Target and Best-- and Walmart shares when they had their warnings. Part of that is the shares are already down some 26%, 27% year to date. This was not a huge shock, like it was perhaps from the others because we had gotten some hints about what was going on with consumer electronics.

The other thing I would note is we have already seen electronics pricing falling. It hasn't been rising. If you look at what the Labor Department reports, prices, television prices down 13% from year over year in June. So interesting here, but I guess it's good news if you're in the market for--

BRIAN SOZZI: A TV.

- --a TV.

BRIAN SOZZI: TV.

- But that's the problem. In a pullback--

- Oh, yes.

- --of spending or a decline in consumer confidence, then there is going to be a decline in people who actually want to go out and have a need for. We're looking at people who are spending specifically on necessities and services right now. And so if we're seeing the year-over-year decline, it's directly correlated to the spending increased on the services side, lower on the discretionary consumer technology side as well, which there's no groceries, to my knowledge, in Best Buy.

BRIAN SOZZI: There's not. There's not.

- I think they sell a little bit of candy.

- That's right.

BRIAN SOZZI: They used to sell a little bit candy.

[INTERPOSING VOICES]

- They used to sell a little bit candy.

BRIAN SOZZI: One more thing here, Citi [? out ?] slapping a sell rating on Best Buy shares. Where that shot could come from? When they report in a few weeks. Do things deteriorate further from what they're announcing was today? And they have to mark down guidance even more to be determined.