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BEST BUY CO INC (BBY)·Q1 2026 Earnings Summary

Executive Summary

  • Q1 FY26 results: Revenue $8.77B (-0.9% y/y), comps -0.7%, adjusted EPS $1.15; EPS beat S&P consensus while revenue was slightly below. Adjusted operating income (OI) rate was 3.8%, ~40 bps above internal outlook, driven by favorable SG&A (indirect tax settlement) and expense control .
  • Guidance trimmed for tariffs: FY26 revenue to $41.1–$41.9B (prior $41.4–$42.2B), comps -1% to +1% (prior 0–2%), adjusted EPS $6.15–$6.30 (prior $6.20–$6.60), OI rate ~4.2% (prior 4.2–4.4%), capex ~$700M (prior $700–$750M) .
  • Mix and category dynamics: Computing/tablets grew (+6% combined comps), offset by declines in home theater, appliances, and drones; online comparable sales +2.1% with online mix at 31.7% of domestic revenue .
  • Near-term outlook: Q2 comps “slightly down” y/y and adjusted OI rate ~3.6%. CFO reiterated FY26 assumptions of stable consumer behavior and current tariff levels through year-end .

What Went Well and What Went Wrong

  • What Went Well

    • Adjusted profitability resilience: 3.8% adjusted OI rate flat y/y and ~40 bps above plan on favorable SG&A; adjusted EPS $1.15 was above expectations .
    • Category bright spots and omnichannel: Comparable growth in computing, mobile phones, and tablets; domestic online comps +2.1% and online mix at 31.7% .
    • Strategic progress: Marketplace on track for mid-year launch with 500+ sellers at launch and Best Buy Ads expanding placements and DSP connectivity (The Trade Desk). CEO: “We are lowering our full-year comparable sales range… and expect an adjusted operating income rate… ~4.2%” while emphasizing mitigation actions and competitiveness .

  • What Went Wrong

    • Topline soft vs consensus: Revenue $8.77B missed consensus slightly; enterprise comps -0.7% as declines in home theater, appliances, and drones weighed on growth .
    • Tariff headwinds and guide trim: FY26 revenue, comps, adjusted EPS, and OI rate range were reduced on tariff updates despite mitigation efforts (sourcing diversification, negotiation, assortment/pricing) .
    • Best Buy Health pressure and restructuring: $109M restructuring charges; rate pressure in Health also weighed on domestic gross profit rate .

Financial Results

Main financials by quarter (oldest → newest):

MetricQ3 FY25Q4 FY25Q1 FY26
Revenue ($B)$9.45 $13.95 $8.77
Gross Margin % (Consolidated)23.5% 20.9% 23.4%
Adjusted Operating Income Rate %3.7% 4.9% 3.8%
GAAP Diluted EPS$1.26 $0.54 $0.95
Adjusted Diluted EPS$1.26 $2.58 $1.15
Enterprise Comparable Sales %(2.9%) 0.5% (0.7%)

Q1 FY26 actual vs S&P Global consensus:

MetricQ1 FY26 ActualS&P Global ConsensusSurprise
Revenue ($B)$8.77 $8.82*Miss
Adjusted EPS ($)$1.15 $1.10*Beat

Values retrieved from S&P Global.

Q1 FY26 segment detail:

SegmentRevenue ($M)Comp Sales %Gross Margin %Adjusted OI ($M)Adjusted OI %
Domestic$8,127 (0.7%) 23.5% $329 4.0%
International$640 (0.7%) 22.0% $4 0.6%

KPI snapshots (Q1 FY26):

KPIQ1 FY26
Domestic online comps %2.1%
Online revenue mix (Domestic)31.7%
Cash returned to shareholders$302M (dividends $202M; buybacks $100M)
Quarterly dividend$0.95 per share; payable July 10, 2025

Guidance Changes

MetricPeriodPrevious Guidance (Q4 FY25)Current Guidance (Q1 FY26)Change
RevenueFY26$41.4–$42.2B $41.1–$41.9B Lowered
Comparable SalesFY260.0% to +2.0% -1.0% to +1.0% Lowered
Adjusted OI RateFY264.2%–4.4% ~4.2% Lowered (narrowed to low end)
Adjusted EPSFY26$6.20–$6.60 $6.15–$6.30 Lowered
Adjusted Tax RateFY26~25% ~25% Maintained
Capital ExpendituresFY26$700–$750M ~$700M Lowered (high end)
Share RepurchasesFY26~$300M ~$300M Maintained
Comparable SalesQ2 FY26—Slightly down y/y New
Adjusted OI RateQ2 FY26—~3.6% New
Quarterly DividendOngoing$0.95 (raised in Mar-2025) $0.95 payable Jul 10, 2025 Maintained

Earnings Call Themes & Trends

TopicPrevious Mentions (Q-2 and Q-1)Current Period (Q1 FY26)Trend
Tariffs/MacroQ3: Softer demand amid macro uncertainty and deal-seeking; adjusted FY25 comps down 2.5–3.5% . Q4: FY26 outlook excluded tariffs initially .Detailed tariff mix and mitigation; China COGS 30–35% (down from 55%); US/Mexico ~25% COGS; diversified sourcing; price/assortment adjustments; FY26 guide trimmed for tariffs .Increasing focus; headwind managed but persistent
AI/Technology initiativesQ4: Focus on strengthening omnichannel and expanding adj OI via Marketplace/Ads .AI-powered search with conversational filtering rolling out before holiday; training to elevate in-store expertise; mixed reality/wearable AI (Ray-Ban Meta) .Building momentum
Marketplace & Retail MediaQ4: Marketplace/Ads cited as incremental profit streams .Marketplace mid-year launch; 500+ sellers at launch; The Trade Desk integration; expanding ad slots, non-endemic advertisers; near-term OI neutral for Ads, accretive for Marketplace .Positive build-out
Product PerformanceQ3: Computing/tablets/services offset declines; CE/appliances/gaming weak . Q4: Computing strength drove better sales .Computing/tablets +6% comps; mobile grew; declines in home theater, appliances, drones; strong Switch 2 demand into Q2 .Mixed; improving in compute/mobile
Supply chain/OperationsQ4: Execution into holiday; online mix 39.5% in Q4 .Data-driven shipping optimization; 60% of online orders within 1 day; record on-time ship performance in 3 years; inventory ~60 days .Improving efficiency
Best Buy HealthQ4: $475M goodwill impairment in Health .$109M restructuring charges; Health margin pressure; optimizing strategy while maintaining at-home care vision .Restructuring; near-term pressure

Management Commentary

  • “We are lowering our full-year comparable sales range to down 1% to up 1% and expect an adjusted operating income rate that is consistent with last year or approximately 4.2%.” — Corie Barry, CEO .
  • “China has come down to 30–35% [of product COGS]… about half… at 30% tariffs and roughly half at 20%… U.S. and Mexico ~25% of COGS at zero tariffs… others like Vietnam/India/Korea/Taiwan at 10% tariff.” .
  • “Due to mitigation efforts… the increased product costs that are flowing to us are lower than the tariff rates… as of mid-May, we have already made the related price and promotional adjustments.” .
  • “Our adjusted operating income rate of 3.8% was approximately 40 basis points better than expected, primarily driven by favorable SG&A expense.” — Matt Bilunas, CFO .
  • “Marketplace… expected to have a positive impact on our operating income rate for fiscal 2026… Best Buy Ads… neutral to operating income for the year while helping gross profit rate.” .

Q&A Highlights

  • Tariff elasticity and sourcing: Management reiterated that effective cost increases are below headline tariff rates due to sourcing flexibility, negotiation, and assortment changes; elasticities modeled by category using updated data .
  • Demand cadence and share: Some pull-forward around Easter and Switch preorders (recognized in Q2); Q1 likely saw slight share loss given fewer launch events, but plans to regain with upcoming launches .
  • SG&A tailwinds: Indirect tax settlement lowered domestic SG&A by at least $13M; ongoing efficiency workstreams continue (procurement, AI-enabled customer care, supply chain optimization) .
  • Q2 outlook and FY26 assumptions: Q2 comps slightly down; adjusted OI rate ~3.6%; FY26 assumes stable consumer behavior and current tariff levels persisting .

Estimates Context

  • Q1 FY26 vs S&P Global consensus: Adjusted EPS $1.15 vs $1.10* (beat); Revenue $8.77B vs $8.82B* (slight miss). 20 EPS estimates and 21 revenue estimates underpinned the consensus*.
  • Implied estimate revisions: FY26 guide reduction (revenue, comps, adjusted EPS) likely drives downward estimate adjustments for the year, particularly topline; mix tailwinds from Ads/Marketplace and services could support margin expectations in back half .

Values retrieved from S&P Global.

Key Takeaways for Investors

  • EPS quality beat on disciplined SG&A and services mix; topline softness persists amid category declines and ongoing value-seeking behavior .
  • Tariff-driven guidance trim reframes FY26: lowered revenue/comps/EPS ranges, with OI rate anchored at ~4.2%; execution on mitigation and competitive pricing are critical to protect demand .
  • Structural growth vectors (Marketplace, Ads) are progressing and should provide incremental gross profit and OI leverage over time, partially offsetting product margin mix pressure (computing weight) .
  • Category catalysts (Windows 10 EOL, AI PC features, Switch 2, wearables/AR) position BBY to capture upgrade cycles into 2H, supporting the high end of comps range if elasticity remains manageable .
  • Health business restructuring reduces near-term drag; monitor subsequent Health profitability trajectory and any additional charges .
  • Near-term setup: Q2 comps slightly down and OI rate ~3.6%; watch promotional cadence, elasticity outcomes post mid-May pricing, and any tariff policy changes .
  • Capital returns intact: $0.95 dividend and ~$300M FY26 buyback plan maintained, signaling confidence in cash generation despite macro/tariff headwinds .

Appendix: Additional Details

  • Category performance Q1 FY26: Domestic comps down 0.7%; growth in computing, mobile, tablets; declines in home theater, appliances, drones .
  • Gross profit drivers: Services (including membership) aided domestic gross profit rate; partially offset by Best Buy Health rate pressure and lower credit card profit-share .
  • Cash flow/returns: Q1 operating cash flow $34M; dividends $202M; buybacks $100M .