Best Buy (BBY) is attempting to turn around a three-year decline in sales growth, but the Street is not convinced the results are coming just yet.
On Tuesday before the market open, the electronics retailer is expected to report its fourth quarter results. Same-store sales is estimated to decrease 1.45% "as a result of macroeconomic stress on spending for discretionary goods, especially big-ticket items," Telsey Advisory Group's Joe Feldman wrote in a note. This would be the 13th consecutive quarter of negative same-store sales growth.
Bank of America analyst Robert F. Ohmes told clients in a note that service revenue is expected to see slower growth this past quarter after it "lapped changes made to its offering in June 2024," as well as a "smaller mix of services" in the fourth quarter.
Investors are looking for 2025 guidance as the replacement cycle kicks in around laptops, notebooks, and phones, especially as innovation around AI ramps up. Evercore analyst Greg Melich called the year a "sweet spot" for the four-to-five-year replacement cycle since the pandemic started in the first quarter of 2020.
As of the market close on Monday, Best Buy stock was up nearly 5% year to date, ahead of the S&P 500's (^GSPC) 1.2% gain.
Here's what Best Buy is expected to post in the fourth quarter compared to the prior year:
Adjusted earnings per share: $2.39, versus $2.72
Net sales: $13.69 billion, versus $14.65 billion
Same-store sales growth overall: -1.45%, versus -4.8%
Total US same-store sales growth: -1.36%, versus -5.1%
Sales growth for:
Appliances: -8.9%, versus -13.7%
Entertainment: -7.47%, versus 8.4%
Consumer electronics: -4.38%, versus -9%
Computing and mobile phones: 4.13%, versus -4.2%
Services: 4.38%, versus 6.3%
International: -2.13%, versus -1.4%
The company will also share its full-year results.
As of the third quarter, Best Buy projected 2024 same-store sales to decline 2.5% to 3.5%. That's compared to a previously expected decline of 1.5% to 3%. The Street expects Best Buy to end the year with a 2.93% decline in same-store sales.
Revenue for the year is projected at $41.1 billion to $41.5 billion, lower than the previous range of $41.3 billion to $41.9 billion.
Earnings per share is expected to be $6.10 to $6.25, compared to a previous range of $6.10 to $6.35.
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Ohmes said "challenging industry trends, lack of innovation, uncertainty around tariffs, and long-term market share pressure from omnichannel competition" like Walmart (WMT) and Costco (COST) could offset growth in computing and services.
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Trump has instituted a 10% tariff on Chinese goods with the threat of an additional 10% coming. He's also planning a 25% tariff on Mexico and Canada after a 30-day pause.
Read more: What are tariffs, and how do they affect you?
Best Buy CEO Corie Barry told reporters on a third quarter media call that vendors have "very, very small margins in this industry, which means the vast majority of that tariff will probably be passed on to the consumer as a price increase."
Roughly 60% of Best Buy's products come from China, and Mexico is its second-largest supplier. Many companies have moved production of larger items to the country in the past five years. Items produced in Mexico include appliances, desktop computers, and large TVs. The business doesn't import from Canada.
Other electronics that could be affected include tablets, phones, and some TVs.
Best Buy did not specify what sort of price increase would go into effect.
Brooke DiPalma is a senior reporter for chof360 Finance. Follow her on Twitter at @BrookeDiPalma or email her at [email protected].
