Daily Brief: Best Buy Isn’t The Retailer Investors Wanted, But It’s The One They Need

Daily Brief: Best Buy Isn’t The Retailer Investors Wanted, But It’s The One They Need

almost 2 years ago3 mins

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Best Buy reported weaker-than-expected quarterly results on Thursday, but the electronics retailer wasn’t about to let investors lose their motivation.

What does this mean?

If you showed up at a Best Buy hoping to sort your holiday gifts last quarter, you might’ve been disappointed: the retailer quickly ran short of all the season’s must-have gadgets, from iPhones to PlayStation 5s. And that’s if you could even get through the front door, with Omicron-driven staff shortages forcing the company to cut its opening hours. So it follows that sales in existing stores were down from the same time the year before.

Best Buy revenue
Source: The Wall Street Journal, FactSet

Best Buy’s profit outlook for this year wasn’t much more encouraging, partly because it’s putting so much money into major projects. But the retailer promised investors that these would pay off in the long term – if they just stick around. And to incentivize them to do just that, it announced it would buy back $1.5 billion worth of its own shares this year, which should push up the value of those left over. Consider them incentivized: Best Buy’s stock jumped 9%.

Best Buy stock
Source: Google Finance

Why should I care?

The bigger picture: Keep those sales coming.

Those projects include an annual membership program – which offers things like unlimited tech support and special discounts – and Best Buy Health, which specializes in healthtech for older people. Best Buy could be onto something here: both avenues have the potential to be more reliable revenue streams for the retailer, reducing its reliance on much more seasonal product sales.

Zooming out: Kroger sticks to the plan.

Best Buy is a bit of an outlier among US retailers this earnings season. Just look at Kroger: hybrid working and the trend toward at-home cooking helped boost demand for the retailer’s groceries, pushing same-store revenue up a better-than-expected 4%. And with more and more shoppers opting for home delivery and pick-up options, its digital sales were twice as high as they were before the pandemic too.

Keep reading for our next story...

Lufthansa Made Yet Another Loss Last Year

Lufthansa image

Lufthansa announced on Thursday that it made a $2.4 billion loss last year, and the German airline isn’t sure it’ll go places in 2022 either.

What does this mean?

Lufthansa finally started getting back on track last year: passenger bookings were picking up quickly in the second half of the year, and the airline’s cargo business – its second-biggest segment – posted a record full-year revenue, thanks to such high demand for air freight. But Lufthansa still made a loss of $2.4 billion, and 2022 is going to present a whole set of new issues: the airline now has to contend with surging fuel costs, as well as the disruption to its flight paths in the wake of the Russian invasion. Investors took the opportunity to disembark here, here, and here: Lufthansa’s stock fell 8%.

Lufthansa stock

Why should I care?

For markets: Lufthansa planned ahead.

Aviation consultancy IBA thinks the airline industry will take at least an extra two months to get back to pre-pandemic levels now war has broken out, which could be why an index tracking Europe’s biggest airlines has dropped almost 20% in just the last two weeks. But at least Lufthansa hasn’t come into this situation totally unprepared: the company has already locked in 63% of its fuel needs for 2022 via futures contracts, meaning it’ll pay $74 a barrel rather than the $111 we hit earlier this week.

Oil price

Zooming out: So much for vacation.

Russia’s airlines have their own problems, with plane manufacturers Airbus and Boeing both announcing this week that they’re not going to send any more aircraft parts into the country. Analysts think that could force the airlines to take pieces from idle planes and add them to functional ones, or else stay grounded. Not that Russians have many places to go, mind you: flights from Russia are being canceled across the globe.

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