Best Buy's Strong Q4 Overshadowed by Weak Guidance and Tariff Concerns

GuruFocus
昨天

Best Buy (BBY, Financial) surpassed Q4 2025 earnings and revenue expectations, marking its first positive comparable sales since Q3 2022, driven by a recovery in PCs and tablets. However, the company's Q1 2026 guidance predicts a return to negative comps, with a "slightly down versus last year" forecast. The FY26 EPS outlook also fell short of expectations based on the guidance midpoint.

The guidance does not account for potential tariff impacts, presenting a "best case scenario." Notably, tariffs on Chinese imports have doubled to 20% from 10%. Approximately 60% of Best Buy's cost of sales involves China, leading to higher prices for PCs, laptops, phones, and other devices as manufacturers pass on these increased costs.

  • Tariffs coincide with a recovery in computing and mobile phone categories, which constitute about 44% of Best Buy's total sales. In Q4, domestic comparable sales for computing and tablets rose 9% as the upgrade cycle accelerated. This momentum may be challenged as higher prices emerge amid ongoing inflation and high interest rates.
  • Enterprise-level comps increased by 0.5%, ending a streak of year-over-year declines. While computing showed strength, appliances, gaming, and home theater remained weak. However, improvements were seen in TVs and headphones.
  • Consumer hesitancy around big-ticket purchases persists, expected to continue in FY26. However, new product innovations drive consumer purchases. Best Buy's FY26 comp guidance of flat to +2% is weighted towards the second half of the year, with new product launches like AI PCs.
  • Best Buy focuses on its high-margin services business, such as installation and repair, positively impacting margins and earnings. In Q4, domestic gross margin increased by 50 bps year-over-year to 20.9%.

Despite a strong Q4 performance, mainly driven by PC and laptop sales, Best Buy's weak outlook and tariff concerns are overshadowing its quarterly success.

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