Best Buy calling a bottom, Dollar Tree stock down after earnings

Yahoo Finance markets reporter Josh Schafer details the performance of Best Buy's earnings following weak electronics demand, consumer trends pre and post-pandemic, and the decline of Dollar Tree's stock.

Video Transcript

- Best buy shares moving to the upside. Looking at gains of just about 3% after reporting better than expected first-quarter earnings. But the company did miss on sales and warned that consumers are quote exhibiting some recessionary behaviors. Yahoo Finance's Josh Schafer following this one for us. And Josh really along-- seems like along the same lines of the theme that we've been talking about with retailers, that cautious consumer.

JOSH SCHAFER: That cautious consumer. And really, what stands out for Best Buy, though, is they think that this is turning right now. So Best Buy has been struggling for several quarters now. Compared to their coverage, their COVID sales they did very well over the pandemic. Obviously, a lot of people were spending on electronics, sort of upgrading even those appliances in their home that Best Buy sells.

So they've been dealing with tough comps for quarters now. They've had declining comparable sales for six quaters. And now they're saying that they think that this is going to be the lowest that comparable sales will be. So comparable sales were down 10% this quarter. They think that's going to improve moving forward each quarter. Still going to be down for the year, but that's why I think you see the stock up today is overall, they're upbeat on what could change here.

They pointed to trends. I guess, apparently, after three years in the 3 to 7-year range is normally when people replace their electronics. We're now getting to that three-year point of people that bought a new TV during COVID, there might be enough new technology, we're in the second half of the year, they might want to replace that technology. So Best Buy thinks that they're sort of going to get a little bit of a seasonality advantage here.

- Josh, let's talk about another retailer that's going in the opposite direction. Shares of Dollar Tree down significantly today out with their earnings. What's weighing on the stock.

JOSH SCHAFER: Yeah, Akiko. I mean, when we talk about the slowdown in the consumer, you would normally think that dollar store-- dollar store chain like Dollar Tree would be doing well, right. But it's interesting. They said that they're dealing with shrink issues that you've heard from other retailers.

And they're also feeling pressure from consumers. They said the consumers are not buying discretionary goods at the same level they were before, and that's weighing on their business. I think the biggest thing that stuck out to me from the call was them just simply saying we are no exception.

Because, again, when you think about recessionary times, potential recessionary times, consumer slowdowns, you normally think of dollar store chains like a Dollar Tree. We're going to hear from Dollar General next week. You normally think that those businesses will be doing well in this time but right now, Dollar Tree just said it's a tough comp out there. It's tough to sell stuff as far as consumer discretionary goods go. So even where things are necessarily-- are normally cheaper at a dollar store, consumers still aren't buying right now.

- See whether or not we see that trend also with Dollar General next week. All right, Josh. Thanks.