Dive Brief:
- Though tariffs remain a looming issue, Best Buy’s second quarter revenue grew 1.6% year over year to about $9.4 billion, per a company release Thursday. Domestic revenue specifically improved 0.9% to $8.7 billion, with comparable sales growing 1.1% driven by gaming, computing and mobile phones.
- The electronics retailer saw its domestic gross profit rate drop slightly from 23.5% the year before to 23.4%, due to lower product margins. Meanwhile, Best Buy’s net earnings across the enterprise declined 36% to $186 million.
- Best Buy maintained its full-year guidance, which was lowered based on Q1 earnings in May. The company had adjusted its outlook based on the impact of changing tariff policies.
Dive Insight:
Though revenue and comps improved for Best Buy, the impact of new tariff rates remains a focus of discussion.
“As expected, the tariff situation has continued to evolve since our last call,” CFO Matt Bilunas said on a call with analysts Thursday. “The tariff rates have increased since May. However, we believe the estimated impacts of the higher rates still fall within our previous guidance range. Consistent with our comments last quarter, due to mitigation efforts by both vendors and by Best Buy, the increased product costs that are flowing to us are expected to remain lower than the tariff rates.”
CEO Corie Barry reiterated that Best Buy only directly imports 2% to 3% of what it sells, adding that any increased costs have been materially lower than the overall effective tariff rate. Furthermore, the retailer has worked to lower its product cost of goods sold from China since March, according to Barry.
The latest positive results come off the launch of a U.S. digital marketplace in August and follow lower performance in recent quarters, though some analysts remain cautious.
“It is also true that the numbers have been aided by some U.S. consumers pulling forward purchases ahead of tariffs — a trend that will likely unwind as we move into the second half of the year,” GlobalData Managing Director Neil Saunders said in emailed comments. “As such, it would be sensible to call the Best Buy numbers a respite rather than a full-blown recovery.”
But other industry analysts believe the combination of improved metrics is a move in the right direction.
“We believe investors are overlooking strong comp trends, momentum from the Switch 2, and the U.S. marketplace launch,” Jefferies analysts said in an emailed note. “These positives are being overshadowed by cost pressure worries, though we believe [management] is well-equipped to navigate the current environment.”
