When will Best Buy’s sales recover?

Best Buy last week forecast sales would decline three-to-six percent in 2023 amid macroeconomic pressures. The chain reported a 10.3 decline in 2022.

The declines followed boom years in 2020 and 2021 as homes underwent tech upgrades.

CEO Corie Barry, speaking on an analyst call, said that Best Buy sees calendar 2023 representing “the bottom for the decline in tech demand” before the industry returns to growth in 2024.

Among the factors driving the return to growth:

• Incremental pandemic purchases: Best Buy “continues to see evidence that much of the growth during the pandemic was incremental, creating a larger install base of technology products in consumers’ homes,” said Ms. Barry. On average, U.S. households have twice as many connected devices than in 2019, with more tech purchases “need-based than want-based.”
• Upgrade time: The upgrade/replacement cycle for early-pandemic purchases is expected to start later this year and grow in 2024 and 2025. Customers’ tech is historically upgraded or replaced every three to seven years.
• Innovation’s return: Innovation was paused mainly in favor of production during the pandemic, but cloud, augmented reality and expanded broadband internet access are among the factors expected to inspire R&D investments. Ms. Barry said, “We believe there will be a desire from our vendor partners to stimulate those replacement cycles or build completely new categories going forward.”
• Emerging gadgets: Wellness technology, personal electric transportation, outdoor living and electric car charging are some emerging opportunities.

In January, The NPD Group predicted that consumer electronics would see a five percent industry decline in 2023 and flat growth in 2024 before returning to growth in 2025 with an assist from the replacement cycle.

In a recent column on nasdaq.com, Steve Koenig, VP, research for the CTA (Consumer Technology Association), wrote that technology innovation accelerates during downturns and can drive overall productivity.

“A new industrial revolution is nigh,” Mr. Koenig wrote. “The increasing capabilities of 5G wireless combined with AI, robotics, cloud computing and other technologies (like advanced sensors and semiconductors) will soon empower enterprises to jumpstart productivity through automation and hasten the pace toward economic prosperity.”

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