Best Buy’s stock (NYSE: BBY) took a surprising hit, dropping 13% on March 4, despite beating estimates in its fourth-quarter (ended Feb 1) earnings report. This decline was significantly steeper than the broader market, with the S&P falling about 1.2% on the same day. Best Buy’s slump highlights the struggles in the consumer electronics retail sector, which faces tough comparisons after a pandemic-fueled sales boom. Rising inflation and potential tariff-driven price hikes have added to the uncertainty, casting a cloud over the retailer’s outlook. The retailer’s profitability and consumer demand have emerged as key investor concerns, as the company navigates a complex and rapidly changing landscape. Separately, see Inflation to Sink S&P 500, Brace For Impact?
Best Buy’s Q4’25 revenue declined 5% y-o-y to $13.95 billion. On the bottom line, the company’s earnings fell significantly to $0.54 per share, compared to $2.12 per share in the prior year period. However, adjusting for a non-cash goodwill impairment charge and other restructuring initiatives, Best Buy’s adjusted earnings came in at $2.58 per share. A bright spot in the quarter was the company’s comparable sales, which rose 0.5% (compared to a 4.8% decline in Q4’24), excluding the additional week in fiscal 2024. This performance exceeded Best Buy’s guidance, which had forecast a change ranging from flat to down 3%. In the U.S., quarterly comparable sales also showed resilience, increasing 0.2% y-o-y. If you want upside with a smoother ride than an individual stock, consider the High Quality portfolio, which has outperformed the S&P, and clocked >91% returns since inception.
Image by Monoar Rahman Rony from Pixabay
How Can Tariffs Impact Best Buy?
The recent imposition of 25% tariffs on imports from Mexico and Canada, along with a doubling of duties on Chinese goods to 20%, is expected to have significant implications for Best Buy’s operations. As China and Mexico are the company’s top two supply chain sources, accounting for approximately 55% and 20% of its products, respectively, the tariffs are likely to result in increased costs for the retailer. Best Buy anticipates that its vendors will pass on some level of tariff costs, leading to higher prices for American consumers. The company’s direct imports account for only 2-3% of its products.
Given Best Buy’s six-week inventory cycle, the company expects the pricing changes to take effect primarily in the Q2 – Q4 period of the fiscal year. As a result, investors should be prepared for potential implications on the company’s financial performance and consumer demand during this period, as the full impact of the tariffs and pricing adjustments unfolds.
The decrease in BBY stock over the last 4-year period has been far from consistent, although annual returns were considerably less volatile than the S&P 500. Returns for the stock were 4% in 2021, -17% in 2022, 3% in 2023, and 14% in 2024. The Trefis High Quality (HQ) Portfolio, with a collection of 30 stocks, is less volatile. And it has comfortably outperformed the S&P 500 over the last 4-year period. Why is that? As a group, HQ Portfolio stocks provided better returns with less risk versus the benchmark index; less of a roller-coaster ride as evident in HQ Portfolio performance metrics.
Can Best Buy Live Up To Its Name?
Best Buy has been diversifying its services, notably through Geek Squad and its health segment, to help product sales, enhance margins, and boost customer engagement. This strategy along with increased membership programs has driven growth, increasing gross margins to 22.6% for the full year of FY 2025 from 22.1% last year. Its adjusted operating margins grew 10 basis points to 4.2% during the same period. Best Buy’s strategic initiatives such as expanding Best Buy Express in Canada and planning a U.S. marketplace launch are expected to drive future growth.
Best Buy’s appliances business is facing headwinds, as soft U.S. home sales and changing consumer preferences weigh on demand. This trend contributed to an 11.4% y-o-y drop in comparable appliance sales in the U.S. in Q4. Meanwhile, Best Buy’s international segment bucked this trend, delivering a 4.9% increase in appliance sales for the fourth quarter.
For fiscal 2026, Best Buy has provided full-year guidance, anticipating revenue to range from $41.4 billion to $42.2 billion (compared to $41.5 billion in FY 2025), accompanied by comparable sales growth of 0% to 2% year over year. Notably, this guidance does not factor in the potential impact of recent or proposed tariffs. Looking ahead, Best Buy expects that consumer behavior will continue to exhibit the same resilience and caution observed in FY 2025, as high inflation persists in driving up household expenses and promoting a discerning, value-driven approach to discretionary spending, particularly on big-ticket items.
We forecast Best Buy’s Revenues to be $41.4 billion for the full year 2026, up marginally y-o-y. Looking at the bottom line, we now forecast adjusted EPS at $6.23. Given the changes to our revenues and earnings forecast, we have revised our Best Buy’s Valuation to $79 per share, based on $6.56 expected EPS and a 12.0x P/E multiple for fiscal 2026 – almost in line with the current market price.
It is helpful to see how its peers stack up. Check out how Best Buy’s Peers fare on metrics that matter. You will find other valuable comparisons for companies across industries at Peer Comparisons.
| Returns | Mar 2025 MTD [1] |
2025 YTD [1] |
2017-25 Total [2] |
| BBY Return | -16% | -12% | 130% |
| S&P 500 Return | -3% | -2% | 158% |
| Trefis Reinforced Value Portfolio | -3% | -5% | 651% |
[1] Returns as of 3/5/2025
[2] Cumulative total returns since the end of 2016
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