Best Buy's fiscal fourth-quarter results exceeded market expectations, revealing key insights into the challenges faced by the electronics retailer in a volatile economic landscape. However, the company has highlighted potential price increases stemming from uncertainties related to tariffs and presented a fiscal year's earnings outlook that does not meet Wall Street estimates at the midpoint. The retail giant projects adjusted earnings per share to fall between $6.20 and $6.60 for fiscal 2026, which is a modest improvement compared to the $6.37 reported in the previous fiscal year.
Notably, the guidance's midpoint of $6.40 falls short of the current consensus on FactSet, which stands at $6.58. Consequently, Best Buy's shares experienced a sharp decline of 14% during Tuesday's trading session. In terms of revenue, the company expects figures to range from $41.4 billion to $42.2 billion, anticipating that comparable sales will remain flat or increase by up to 2%.
Comparatively, fiscal 2025 sales saw a drop to $41.53 billion from $43.45 billion on an annual basis, with comparable sales declining by 2.3%. The market, however, is optimistic, expecting sales of $41.75 billion and a 1.5% increase in same-store sales. Best Buy's current outlook does not account for the potential ramifications of recently implemented or proposed tariffs due to ongoing uncertainties about the duration, timing, magnitude, and affected countries.
Chief Executive Corie Barry emphasized the unpredictability during an earnings call, acknowledging that consumer reactions could significantly impact sales. In light of this, US President Donald Trump’s recently announced 25% tariffs on imports from Canada and Mexico are set to take effect, with reports also indicating a doubling of levies on Chinese imports from 10% to 20%. The significance of international trade is paramount to Best Buy's operational success, with China and Mexico identified as the top two sources for many products sold.
Barry noted that while Best Buy imports only 2% to 3% of its overall product assortment directly, it anticipates vendors will transfer some tariff costs to retailers, suggesting that price increases for American consumers are highly probable. Looking at the three-month period ending February 1, Best Buy’s adjusted earnings per share decreased to $2.58 from $2.72 in the previous year.
However, this figure surpassed the average analyst estimate of $2.40. Revenue for the period fell to $13.95 billion from $14.65 billion but still exceeded the Street's expectation of $13.68 billion. This positive revenue performance was largely driven by significant growth in computing, as well as improvement in other product categories, according to Barry. Comparable sales rose by 0.5%, surpassing market forecasts of a 1.5% decline, bolstered by gains in both domestic and international operations.
Highlights included growth in computing, tablets, and services, contributing to the domestic same-store sales growth of 0.2%. However, declines were noted in appliances, home theater, and gaming categories, with foreign-exchange fluctuations presenting a 500 basis-point headwind on international sales. As the company moves further into fiscal 2026, Best Buy expects comparable sales to be slightly down compared to the previous year, according to Chief Financial Officer Matt Bilunas.
Analysts on FactSet are projecting minor growth of 0.4% in same-store sales. In Bilunas's perspective, consumer behavior is anticipated to remain largely similar to last year, characterized by resilience while grappling with elevated inflation that impacts overall expenses, compelling consumers to adopt a more value-focused approach to significant purchases..