Aggressive Holiday Season Pricing Could Pressure Best Buy in 2nd Half, Says Analyst
A CE industry retail boost from a “mini-product cycle” in gaming and market share gains from struggling or bankrupt competitors “is transitory,” wrote Wedbush Securities analyst Michael Pachter in a research note to investors Thursday, ahead of Best Buy’s Tuesday…
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earnings call. Following expected “solid” Q2 results from Best Buy’s gains after Sears store closings and h.h. gregg’s bankruptcy, Pachter expects Best Buy growth to “stall” in the back half of the year, with comps flat to slightly down. A “possibly delayed iPhone 8 launch” could drive second-half declines, said Pachter, along with “aggressive holiday pricing” as Walmart and Amazon battle on price, leaving Best Buy “caught in the crossfire.” Wedbush predicts Amazon will “preemptively strike first and compete aggressively on price beginning on Black Friday, continuing through holiday,” a departure from previous years when the e-commerce giant raised prices immediately following Cyber Monday and held course until Christmas week. “If we are right, price competition will pressure Best Buy margins in the key holiday period,” he said. Wedbush expects Best Buy to post Q2 revenue of $8.72 billion, saying GoPro and Fitbit results in the quarter “imply solid health and fitness results” in the consumer electronics category. But sales and pricing pressure from Amazon’s Prime Day, “particularly on HDTVs,” likely limited revenue gains, he said.