Best Buy (BBY) investors woke up to disappointing news on Thursday as the retailer reported mixed earnings and lowered its forecast for 2025, citing the ongoing impact of tariffs. Shares plunged nearly 9% after the release, bringing the company’s year-to-date losses to more than 22%, significantly underperforming the broader market.
Quarterly Performance: Mixed Results
In its first-quarter earnings, Best Buy posted a 0.7% decline in same-store sales, worse than the expected 0.57% drop. The retailer also saw a slight revenue miss, reporting $8.77 billion, just shy of analysts’ forecast of $8.80 billion. However, adjusted earnings per share of $1.15 exceeded expectations by $0.06, indicating that the company’s bottom line was slightly better than anticipated despite the challenges.
Tariff Impact and Lowered Guidance
Best Buy’s guidance for 2025 now projects revenue between $41.1 billion and $41.9 billion, lower than its previous range of $41.4 billion to $42.2 billion. The company also revised its adjusted earnings per share forecast to between $6.15 and $6.30, down from a previous range of $6.20 to $6.60. The updated forecast reflects the ongoing impact of tariffs, with CEO Corie Barry stating that the company has worked to offset these costs, but still faces significant headwinds from rising product prices.
Shifting Supply Chain Challenges
Barry noted that the company’s reliance on products from China remains substantial, with 35% of its product costs tied to Chinese manufacturing, down from 55% earlier this year. The retailer has urged its vendors to diversify their supply chains and negotiate prices to mitigate tariff impacts. However, as the U.S. continues to adjust tariffs on Chinese goods, Best Buy faces an unpredictable landscape. While consumer electronics such as TVs and major appliances are not subject to the tariffs due to the USMCA trade agreement, other categories, such as gaming consoles and furniture, remain affected by the 20% tariff and the additional 10% universal duty.
Price Increases and Consumer Behavior
To cope with higher costs, Best Buy implemented price hikes by mid-May, with Barry stating that further increases could be on the horizon depending on the evolving tariff situation. Despite these adjustments, Best Buy believes it is well-positioned for the back-to-school and holiday seasons, with inventory levels managed effectively to meet demand. However, analysts remain cautious, noting the challenges posed by the complexities of the global electronics supply chain and its ties to China.
Analyst Sentiment and Risks Ahead
Analysts have mixed opinions on Best Buy’s ability to navigate the current environment. Telsey Advisory Group’s Joe Feldman believes that the retailer’s strong position in consumer electronics will help it weather the storm, but Wedbush’s Matthew McCartney warns that continued price increases could weigh heavily on the company’s top line. With tariffs continuing to disrupt the electronics market, Best Buy faces a significant risk of margin pressure and a slowdown in sales if costs continue to climb.
