Best Buy Beats Q1 Earnings Estimates, Cuts FY26 Guidance on Tariffs

Best Buy Co., Inc. BBY reported first-quarter fiscal 2026 results, wherein revenues were in line with the Zacks Consensus Estimate and earnings surpassed expectations. However, both metrics declined year over year, and enterprise comparable sales also fell. The company revised its full-year guidance downward, citing the impact of tariffs.Despite these challenges, Best Buy remains committed to its strategic roadmap, which focuses on elevating the omnichannel experience of customers, scaling revenue streams, such as its Best Buy Marketplace and Best Buy Ads, and boosting operational efficiency to fund long-term investments and offset external pressures.Insight Into BBY’s Quarterly PerformanceAdjusted earnings of $1.15 per share surpassed the Zacks Consensus Estimate of $1.09. However, the bottom line fell from $1.20 per share reported in the year-ago period. (Stay up-to-date with all quarterly releases: See Zacks Earnings Calendar.)Enterprise revenues came in at $8,767 million, almost in line with the consensus mark of $8,766 million but fell 0.9% from the prior-year quarter's figure of $8,847 million. Enterprise comparable sales decreased 0.7% year over year.Gross profit dropped 0.7% to $2,049 million, while the gross margin expanded 10 basis points (bps) to 23.4%. We had projected an adjusted gross margin expansion of 20 bps. Adjusted operating income was $333 million, flat compared with the year-ago quarter. The adjusted operating margin of 3.8% also remained even with the prior year period. We had expected the adjusted operating margin to shrink 40 basis points.Adjusted selling, general and administrative (SG&A) expenses were $1,716 million, down 0.9% year over year. Adjusted SG&A, as a percentage of revenues, remained flat at 19.6%. We had estimated adjusted SG&A expenses to deleverage 60 bps.Best Buy Co., Inc. Price, Consensus and EPS Surprise Best Buy Co., Inc. price-consensus-eps-surprise-chart | Best Buy Co., Inc. QuoteBBY’s Domestic & International OperationsDomestic revenues of $8,127 million fell 0.9% year over year due to a comparable sales decline of 0.7%, which came in line with our expectations. The decline in comparable sales was owing to weaker performance in home theater, appliances, and drones. This was partially offset by growth in computing, mobile phones, and tablets.Domestic online revenues were $2.58 billion, reflecting a 2.1% increase on a comparable basis. Online sales accounted for 31.7% of total domestic revenues, up from 30.8% in the year-ago period.The domestic gross margin expanded 10 basis points to 23.5%. The increase was driven by stronger performance in the services segment, including its membership offerings. This was partly offset by margin pressure in the Best Buy Health segment and reduced profit-sharing revenues from the company’s private label and co-branded credit card arrangement. The segment’s adjusted operating income was $329 million, up from $325 million recorded last year. As a percentage of revenues, the metric remained flat at 4%.International revenues of $640 million fell 0.6% year over year due to a negative foreign currency impact of about 450 basis points and a comparable sales decline of 0.7%. We had projected a comparable sales decline of 0.1%. The decline in revenue was largely offset by contributions from Best Buy Express locations in Canada. International gross margin contracted 80 basis points to 22%, primarily due to lower product margin rates and increased supply chain costs. The segment’s adjusted operating income was $4 million, down from $8 million recorded in the year-ago quarter. As a percentage of revenues, the metric contracted 60 bps year over year to 0.6%.BBY’s Financial SnapshotBest Buy ended the quarter with cash and cash equivalents of $1,147 million, long-term debt of $1,153 million, and a total equity of $2,763 million.During the quarter under review, the company returned $302 million to shareholders, comprising $202 million in dividends and $100 million in share repurchases. The company plans to allocate $300 million for share repurchases in fiscal 2026.Best Buy Revises FY26 ViewFor the second quarter, BBY expects comparable sales to be marginally down from the year-ago period, with an adjusted operating margin of 3.6%.Management updated its fiscal 2026 view, and now expects revenues between $41.1 billion and $41.9 billion, slightly below the prior estimated range of $41.4 billion to $42.2 billion. BBY also revised its comparable sales forecast to a range of down 1% to up 1% compared with the earlier guidance of flat to 2% growth.It now foresees adjusted operating margin to be approximately 4.2% compared with the prior guided range of 4.2% to 4.4%. Best Buy now envisions adjusted earnings per share to fall between $6.15 and $6.30, slightly lower than the earlier range of $6.20 to $6.60. Capital expenditures are projected at around $700 million compared with the previous estimate of $700 million to $750 million.Shares of this Zacks Rank #4 (Sell) company have plunged 25.2% in the past three months compared with the industry’s decline of 17.4%.Don’t Miss These Solid BetsUrban Outfitters, Inc. URBN, which operates a portfolio of global consumer brands including the Anthropologie, Free People, FP Movement, Urban Outfitters and Nuuly brands, currently sports a Zacks Rank #1 (Strong Buy). URBN has a trailing four-quarter earnings surprise of 29%, on average. You can see the complete list of today’s Zacks #1 Rank stocks here.The Zacks Consensus Estimate for Urban Outfitters’ current financial-year sales and earnings implies growth of 8% and 20.9%, respectively, from the year-ago reported numbers.Genesco Inc. GCO, a footwear-focused company, currently carries a Zacks Rank #2 (Buy). GCO has a trailing four-quarter earnings surprise of 37.2%, on average. The Zacks Consensus Estimate for Genesco’s current financial-year sales and earnings calls for growth of 0.6% and 63.8%, respectively, from the year-ago reported numbers.Kontoor Brands, Inc. KTB, a global lifestyle apparel company, carries a Zacks Rank #2. KTB has a trailing four-quarter earnings surprise of 8.1%, on average. The Zacks Consensus Estimate for Kontoor Brands’ current financial-year sales and earnings suggests growth of 1.1% and 9.6%, respectively, from the year-ago reported numbers.Zacks' Research Chief Names "Stock Most Likely to Double"Our team of experts has just released the 5 stocks with the greatest probability of gaining +100% or more in the coming months. Of those 5, Director of Research Sheraz Mian highlights the one stock set to climb highest.This top pick is among the most innovative financial firms. With a fast-growing customer base (already 50+ million) and a diverse set of cutting edge solutions, this stock is poised for big gains. Of course, all our elite picks aren’t winners but this one could far surpass earlier Zacks’ Stocks Set to Double like Nano-X Imaging which shot up +129.6% in little more than 9 months.Free: See Our Top Stock And 4 Runners UpWant the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report Best Buy Co., Inc. (BBY): Free Stock Analysis Report Urban Outfitters, Inc. (URBN): Free Stock Analysis Report Genesco Inc. (GCO): Free Stock Analysis Report Kontoor Brands, Inc. (KTB): Free Stock Analysis ReportThis article originally published on Zacks Investment Research (zacks.com).Zacks Investment ResearchWeiter zum vollständigen Artikel bei Zacks Weiter zum vollständigen Artikel bei Zacks