Best Buy holiday shopping forecast constrained by supply issues

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Nordstrom, Best Buy and the Gap all flagged issues Tuesday with getting items on shelves, slamming their stock prices just ahead of the all-important holiday season.

Retailers are struggling with merchandise stuck in cargo containers in clogged US ports after a spike in pent-up demand overwhelmed supply chains already stressed by the pandemic.

Best Buy said a shortage of some electronics could hammer its business during the crucial holiday season. Nordstrom said women’s shoes and items at its off-price Rack stores could be in thin supply. And the Gap flagged “headwinds” getting merchandise to customers.

The stocks of all three retailers fell sharply Tuesday, with Nordstrom shares dropping more than 23 percent in after-hours trade. Gap shed nearly 17 percent after-hours and Best Buy fell more than 12 percent during regular trade.

Best Buy on Tuesday projected weaker-than-expected estimates for its latest quarterly sales, reflecting the toll of shipping logjams, shuttered factories and a scarcity of raw materials that have ripped through global supply chains this year.

Best Buy
Chip shortages loom large among Best Buy’s supply chain worries.
Getty Images

The company is facing supply constraints in categories such as appliances, mobile phones and gaming, chief executive Corie Barry said on a post-earnings call.

Microsoft and Sony have struggled to keep the latest versions of their gaming consoles in stock since their launch a year ago due to a widespread chip crunch, while some analysts have warned Apple’s latest iPhones could be in short supply during the holiday season.

Those devices are important for Best Buy as they sell in large numbers and act as a magnet for customers who often spend on other products.

New iPhones displayed in store
Some industry watchers project shoppers will have trouble finding the latest iPhone models.
REUTERS

“Getting hold of Apple’s latest iPhone or its new laptops is very challenging. These items should, in theory, be providing a nice lift to sales as the holidays approach, but stock levels remain low,” said Neil Saunders, managing director of research provider GlobalData.

Best Buy forecast current-quarter comparable sales between a fall of 2 percent and a rise of 1 percent, the midpoint of which was below estimates of a 0.1 percent rise, according to Refinitiv data.

At Nordstrom, meanwhile, the Seattle-based company reported a sharp rise in costs in the quarter as it spent more on staffing its stores amid labor shortages in the United States that have forced retailers to increase wages and hand out hefty bonuses.

The Gap and Banana Republic
Gap said supply-chain issues were hampering its ability to get items to shelves.
Shutterstock

Big-box retailers Walmart Inc and Target Corp posted a drop in their quarterly margins last week, reeling under heightened labor and supply chain costs.

Nordstrom posted a profit of $64 million, or 39 cents per share, for the quarter ended Oct. 30, missing analysts’ estimate for a profit of 56 cents.

And at the Gap, the retailer reported net sales for the third quarter of $3.94 billion, compared with $3.99 billion a year earlier and $4 billion for the same period in 2019. Analysts polled by FactSet were expecting sales of $4.43 billion.

The company said that supply chain disruption had an 8 percentage point negative effect on sales because of constrained inventory.

“While we entered the third quarter with growing momentum, acute supply chain headwinds affected our ability to fully meet strong customer demand,” Chief Executive Sonia Syngal said in prepared remarks.

Syngal said the company would accelerate its use of air freight to better position it for the holiday shopping season.

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