Feb 29 (Reuters) - Best Buy reported a smaller-than-expected drop in quarterly comparable sales on Thursday, as holiday deals led shoppers to spend on big-ticket purchases like electronics and home appliances, sending its shares up 3% before the bell.
Consumers, however, remained cautious as higher borrowing costs force them to make trade-off decisions to cover for household essentials.
Domestic revenue weakened about 1% to $13.41 billion in the fourth quarter, driven by softness in demand for home theater, appliances, mobile phones and tablets across its stores and online.
Still, Best Buy's focus on its paid membership program during the peak holiday shopping season resulted in customers opting for its product services and delivery.
With subscription tiers of $179.99 per year, $49.99 per year and a free membership, the program led to better services margin rates, helping quarterly gross profit rate rise to 20.5% from 20% a year ago.
CFO Matt Bilunas said he expects memberships to help expand the rate by about 20 to 30 basis points in fiscal 2025.
The company forecast a drop in comparable sales of as much as 3% compared to market expectation of a 0.23% rise.
In the fourth quarter, Best Buy took $169 million in charges, mainly related to employee termination benefits tied to its restructuring plan. It earned $2.72 per share, compared to LSEG estimates of $2.52.
The top U.S. electronics retailer's comparable sales fell 4.8%, its ninth straight quarterly decline, compared to average analysts' expectation of a 5.36% drop, according to LSEG data.
Reporting by Savyata Mishra in Bengaluru; Editing by Arun Koyyur
Source: Reuters