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

Best Buy (BBY) reported Q1 fiscal 2026 earnings that beat estimates, though revenue declined 0.9% year-over-year to $8.77B. The company lowered its full-year guidance for revenue to $41.1B-$41.9B and EPS to $6.15-$6.30, citing the anticipated impact of tariffs; comparable sales are now expected to be down 1% to up 1%, a revision from the previous flat to 2% growth forecast. Despite the lowered outlook, Best Buy is maintaining its focus on omnichannel improvements and revenue diversification.

Analysis

Best Buy Co., Inc. (BBY) reported mixed first-quarter fiscal 2026 results, with adjusted earnings of $1.15 per share surpassing the Zacks Consensus Estimate of $1.09, yet declining from $1.20 per share year-over-year. Enterprise revenues of $8,767 million were in line with estimates but fell 0.9% from the prior-year quarter, accompanied by a 0.7% decrease in enterprise comparable sales. A significant development was the downward revision of full-year fiscal 2026 guidance, attributed to the anticipated impact of tariffs; revenue is now expected between $41.1 billion and $41.9 billion (down from $41.4-$42.2 billion), comparable sales between -1% and +1% (down from flat to +2%), and adjusted earnings per share between $6.15 and $6.30 (down from $6.20-$6.60). Despite these headwinds, the company maintained a flat adjusted operating margin of 3.8% year-over-year, better than the 40 bps contraction projected by Zacks, and achieved a slight gross margin expansion of 10 bps to 23.4%. Domestic online revenues showed resilience, growing 2.1% on a comparable basis and accounting for 31.7% of total domestic revenues. However, the international segment faced challenges, with revenues falling 0.6% and gross margin contracting 80 bps due to lower product margins and increased supply chain costs. Best Buy returned $302 million to shareholders in Q1 and plans $300 million in share repurchases for fiscal 2026. The stock has underperformed, declining 25.2% in the past three months, exceeding the industry's 17.4% fall, and carries a Zacks Rank #4 (Sell).

Key Decisions for Investors

• Investors should acknowledge the Q1 earnings beat but weigh it against the declining year-over-year metrics and, more critically, the lowered full-year fiscal 2026 guidance driven by tariff concerns, which signals increased uncertainty for revenue and profitability.
• Monitor comparable sales trends closely, particularly the performance of key categories and the contrasting margin dynamics between the domestic services segment and the struggling international operations, as well as the actual impact of tariffs as they materialize.
• Exercise caution given the stock's recent significant underperformance, the Zacks Rank #4 (Sell) designation, and moderately negative sentiment; the planned $300 million share repurchase program provides some support, but a sustained improvement in operational metrics and mitigation of external pressures will be key for a more positive outlook.