By Uday Sampath Kumar

(Reuters) – Expectations are low for electronics retailers Best Buy Co Inc’s quarterly earnings were released Tuesday by NYSE after two leading industry figures revealed that Americans balk at large-ticket purchases because of decades-high inflation.

Five brokerages have lowered their price targets for company stock during the period leading up to earnings. Others cite the astonishing impact price pressures had on consumer spending.

Low-income customers are particularly affected by inflationary pressures, which is affecting discretionary spending. Jason Benowitz senior portfolio manager, Roosevelt Investment Group said that there was also an important shift in consumer consumption to goods and services. The most affected by this shift is the demand for high-ticket items.”

He said, “We think these trends will weigh on Best Buy’s results and outlook when they report,”

Walmart and Inc are retail behemoths. Target Corporation (NYSE:) announced earnings last week which missed estimates by the largest margin in five years.

THE CONTEXT

According to industry executives, consumers are prioritizing necessities and shunning electronics in an inflationary environment. This could spell bad news for Best Buy, which is a company that makes its money selling flat-screen TVs, laptops, and iPhones.

The company is also facing pressure from supply issues for in-demand items such as Sony Corp’s PlayStation (TYO:). This led to Telsey Advisory Group cutting its price target to $90 by 40%.

According to IBES data from Refinitiv, Best Buy’s first quarter sales will fall by 11% to $10.41 trillion, and its profit will fall 28% down to $1.61 per shares. 99a9c4b1-ea6a-4227-995a-49e5105a6a901

Graphic: Best Buy’s quarterly sales to decline as inflation pinches consumers’ pockets – https://graphics.reuters.com/USA-RETAIL/mopanzqnbva/chart.png

Analysts still expect a moderate reaction from the shares of the company to any possible negative earnings.

Benowitz stated that investors might have priced in a lower revision of earnings expectations to get ahead of Wall Street analysts and the company.

THE FUNDAMENTALS f708b9f0-35a3-4f59-9ad9-0b51a449ad672

Graphic: Best Buy underperforms – https://fingfx.thomsonreuters.com/gfx/mkt/byprjdqjzpe/Best%20Buy.png

* Best Buy has exceeded quarterly profit estimates for five straight years, although it has missed Wall Street expectations for revenue two times in the past five quarters.

* The company in March forecast for fiscal 2023 adjusted earnings per share of $8.85 to $9.15 and a decline in comparable sales of 1% to 4%.

WALL STREET SENTIMENT

* The current average rating of 29 analysts is “hold”, with only two analysts having a “sell” or lower rating.

** The median price target (PT) is $114, down from $130 a month earlier, with seven brokerages reducing their PTs on the stock just this month.