Best Buy's stock took a dip Thursday, even though the electronics retailer delivered a solid second-quarter beat and raised its full-year outlook. Sometimes the market just wants more, or maybe it's worried about what the strong results say about the consumer. Either way, let's dig into the numbers.
Best Buy Beats, Raises Guidance, but Shoppers Are Still Deal Hunters
MarketDash
Best Buy's Q2 earnings beat and raised outlook couldn't stop the stock from slipping. Consumers are spending, but they're picky about where.
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Earnings Snapshot
The company reported adjusted earnings of $1.47 per share, comfortably ahead of the $1.38 analysts were looking for. Revenue came in at $9.78 billion, up 3.6% year over year and above the $9.59 billion estimate.
Comparable sales rose 4.1%, which is a big deal because the company had guided for only about 1% growth. Computing was the star again, leading comparable sales growth for the 10th consecutive quarter, helped by upgrades, replacements, and new products. Best Buy Business sales jumped 21%, which is a nice boost.
Adjusted operating margin expanded by about 40 basis points to 4.3%, and a $34 million tariff refund gave both gross and operating margins a little extra cushion.
Business Performance
Domestic revenue grew 4.3% to $9.07 billion, with comparable sales up 4.5%. Computing, home theater, and emerging categories like AI glasses and trading cards were the main drivers.
Online sales in the U.S. rose 5.1% on a comparable basis to $3 billion, making up 33.1% of domestic revenue, up from 32.8% a year ago. International revenue, however, fell 4.2% to $709 million, hit by a 1.8% comparable sales decline and unfavorable currency moves.
Home theater had its best quarter since the second quarter of fiscal 2022, with domestic TV sales up 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 straight quarter, and major appliances edged higher. Traditional gaming sales declined, though, because Best Buy was lapping the successful launch of Nintendo's Switch 2.
On the earnings call, CEO Corie Barry said consumers are still willing to spend, but they're hunting for value and gravitating toward sales events. They're cautious about big-ticket purchases, she noted, but will pay up when they need to replace essential items or when there's compelling new tech to justify it.
AI, Marketplace And Membership Growth
Best Buy's U.S. Marketplace gross merchandise value hit about $300 million in the quarter, and the company expects full-year GMV of $1.3 billion.
The retailer has completed more than half of its 50 planned Meta Labs locations. Each one is about 900 square feet and staffed with trained employees focused on Meta's ecosystem, including AI glasses and VR products.
Best Buy also launched AskBlue, a conversational AI shopping assistant, and finished its OpenAI commerce integration, which lets customers discover products, get recommendations, and make purchases through ChatGPT.
Paid memberships for My Best Buy Plus and Total are expected to grow from just over 8 million in February to about 9 million by year-end.
Outlook Raised
Best Buy raised its fiscal 2027 adjusted earnings outlook to $6.70 to $6.90 per share, up from $6.30 to $6.60, and above the $6.58 consensus. Sales are now expected to be $42.3 billion to $42.8 billion, up from $41.2 billion to $42.1 billion, while analysts were looking for $42.06 billion.
The company now projects comparable sales growth of 1.9% to 3%, compared with its previous range of a 1% decline to 1% growth. Gross margin is expected to improve by 30 to 40 basis points.
Best Buy Ads is expected to grow 10% this year after generating $900 million in collections last 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 also mentioned that the expected release of "Grand Theft Auto VI" could give software and hardware sales a boost in the fourth quarter. But higher memory prices continued to flow through the product assortment during the second quarter, which is something to watch.
BBY Price Action: Best Buy shares were down 4.22% at $83.75 at the time of publication on Thursday.
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