Best Buy Beats Estimates and Raises Guidance, Shares Still Fall

Best Buy shares traded lower on Thursday after the electronics retailer reported better-than-expected second-quarter results and raised its full-year outlook.

Earnings Snapshot

Best Buy reported adjusted earnings per share of $1.47, above the consensus estimate of $1.38.

Sales rose 3.6% year over year to $9.78 billion, surpassing the $9.59 billion expectation.

Comparable sales grew 4.1%, well above the company's prior guidance of approximately 1% growth. Driven by upgrades, replacements, and new products, the computing category led comparable sales growth for the 10th consecutive quarter. Best Buy's enterprise business sales jumped 21%.

Adjusted operating margin expanded approximately 40 basis points to 4.3%. A $34 million tariff refund supported gross margin and operating margin.

Business Performance

Domestic revenue grew 4.3% to $9.07 billion, driven by a 4.5% increase in comparable sales. Computing, home theater, and emerging categories such as AI glasses and trading cards led the growth.

Domestic online comparable revenue rose 5.1% to $3 billion. Online sales accounted for 33.1% of domestic revenue, up from 32.8% in the same period last year.

International revenue declined 4.2% to $709 million, primarily due to a 1.8% decrease in comparable sales and unfavorable foreign exchange movements.

The home theater category posted its strongest growth since the second quarter of fiscal 2022, with domestic TV sales climbing more than 10%. Emerging categories, including AI glasses, trading cards, and health rings, more than doubled in sales.

Mobile phone sales grew for the sixth consecutive quarter. Major appliance sales edged higher, while legacy gaming sales declined as Best Buy faced a difficult comparison against the successful launch of the Nintendo Switch 2.

On the earnings call, CEO Corie Barry said consumers remain willing to spend but continue to seek value and are drawn to promotions. She noted that shoppers remain cautious about big-ticket purchases, though they are willing to pay higher prices when replacing essentials or buying compelling new technology.

AI, Marketplace, and Membership Growth

During the quarter, U.S. marketplace gross merchandise value was approximately $300 million. Best Buy expects full-year gross merchandise value of $1.3 billion.

The retailer has completed more than half of its planned 50 Meta Labs stores. Each location spans approximately 900 square feet and is staffed with trained employees focused on the Meta ecosystem.

Best Buy also launched AskBlue, a conversational AI shopping and support assistant. Additionally, the company completed a commercial integration with OpenAI, enabling customers to discover products, receive recommendations, and make purchases through ChatGPT.

Paid My Best Buy Plus and Total membership is expected to grow from just over 8 million in February to approximately 9 million by year-end.

Raised Outlook

Best Buy raised its fiscal 2027 adjusted earnings per share outlook to $6.70 to $6.90, up from the previous $6.30 to $6.60. The revised range also sits above the consensus estimate of $6.58.

The company raised its sales forecast to $42.3 billion to $42.8 billion, from $41.2 billion to $42.1 billion. Analysts expected sales of $42.06 billion.

Best Buy now expects comparable sales growth of 1.9% to 3%, versus its prior outlook range of a 1% decline to 1% growth. The company expects gross margin to improve by 30 to 40 basis points.

Best Buy's advertising business generated $900 million in revenue last year and is expected to grow 10% this year.

For the third quarter, the company expects comparable sales growth of 1% to 3%, with August trends tracking near the upper end of that range.

Management said the anticipated release of Grand Theft Auto VI could support fourth-quarter software and hardware sales. However, higher memory prices continued to flow through the company's product mix during the second quarter.

BBY stock movement: At the time of publication Thursday, Best Buy shares were down 4.22% at $83.75.