By Ananya Mariam Rajesh
(Reuters) -Best Buy on Tuesday cut the top end of its annual revenue forecast after beating quarterly sales and profit estimates as bigger discounts encouraged bargain-hunting Americans to shop for appliances and laptops at its stores.
Shares of the top U.S. electronics retailer climbed about 4% in early trading after CEO Corie Barry signaled improving television sales trends.
The company also projected a slightly better-than-expected back-to-school season.
Still, Best Buy joined Target and Macy's (NYSE:M) in flagging customers reining in discretionary spending and shifting to essentials amid sticky inflation or spending on services and experiences.
Best Buy also offered higher discounts during its "Black Friday in July" savings event to compete with Amazon.com (NASDAQ:AMZN)'s 48-hour "Prime Day" shopping event.
The customer will look for "great" deals during the holiday shopping season with traffic more weighted towards promotional events, Barry said in a post-earnings call.
Second-quarter revenue fell 7.2% to $9.58 billion but beat estimates of $9.52 billion, while adjusted profit of $1.22 per share also topped analysts' expectations of $1.06, according to IBES data from Refinitiv.
Best Buy's guidance incorporated the discounting and "they did a little bit better than their plan," said Telsey Advisory Group analyst Joseph Feldman.
Domestic gross profit rate expanded to 23.1% from 22% a year earlier, as the company opened more smaller outlets that sell used and refurbished electronics, as well as its launch of a three-tier membership plan that offered exclusive deals and access to hard-to-find products.
"If revenue is starting to weaken...they have another lever to pull up on the margin side of things," said Dave Wagner, equity analyst and portfolio manager at Aptus Capital Advisors.
Best Buy now expects annual revenue between $43.8 billion and $44.5 billion, compared to $43.8 billion to $45.2 billion previously.
The company sees adjusted earnings per share of $6.00 to $6.40, compared to $5.70 to $6.50 earlier.