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BB

BEST BUY CO INC (BBY)·Q4 2025 Earnings Summary

Executive Summary

  • Q4 FY25 revenue was $13.948B, enterprise comparable sales rose 0.5%, and adjusted diluted EPS was $2.58; GAAP diluted EPS was $0.54 due to a $475M goodwill impairment in Best Buy Health, reducing GAAP EPS by $2.02 .
  • Domestic gross profit rate improved 50 bps to 20.9% on stronger services/membership performance; International gross profit rate rose 40 bps to 21.4% on lower supply chain costs .
  • FY26 guidance: revenue $41.4–$42.2B, comps 0–2%, adjusted operating income rate 4.2–4.4%, adjusted EPS $6.20–$6.60, capex $700–$750M; Q1 FY26 comps expected slightly down and adjusted OI rate ~3.4% .
  • Board raised the quarterly dividend 1% to $0.95 per share; company plans ~$300M of FY26 buybacks .
  • Management flagged potential tariff headwinds; if China’s 10% tariff persists, BBY estimates ~1 point negative comps impact, mainly in Q2–Q4 FY26; FY26 guidance excludes tariff impacts .

What Went Well and What Went Wrong

What Went Well

  • Computing and tablets drove the comp beat; “better-than-expected sales for the fourth quarter driven by strong growth in computing” and adjusted OI rate outperformed expectations .
  • Digital engagement strengthened: “digital sales were almost 40% of total domestic sales,” Best Buy app reached #1 shopping app on Black Friday, with ~20% traffic growth; 45% of online revenue was store pickup, improving omni-channel momentum .
  • Services/membership improved margin: domestic gross profit rate +50 bps YoY to 20.9% primarily from services/memberships; services comp +9.9% in domestic segment .

What Went Wrong

  • Category headwinds: appliances (-11.4%), home theater (-2.2%), and entertainment (-10.9%) were drags despite computing/tablets/services strength .
  • Credit card economics: lower profit-sharing revenue from private label/co-branded cards partially offset gross margin gains .
  • Best Buy Health impairment: recorded $475M goodwill impairment, lifting GAAP effective tax rate to 47.2% due to nondeductible portion; GAAP EPS suppressed to $0.54 .

Financial Results

Quarterly Trend (oldest → newest)

MetricQ2 FY25Q3 FY25Q4 FY25
Revenue ($USD Millions)$9,288 $9,445 $13,948
Gross Profit Margin %23.5% 23.5% 20.9%
GAAP Operating Income %4.1% 3.7% 1.6%
Adjusted/Non-GAAP Operating Income %4.1% 3.7% 4.9%
GAAP Diluted EPS ($)$1.34 $1.26 $0.54
Adjusted/Non-GAAP Diluted EPS ($)$1.34 $1.26 $2.58

Year-over-Year: Q4 FY24 vs Q4 FY25

MetricQ4 FY24Q4 FY25
Revenue ($USD Millions)$14,646 $13,948
Enterprise Comparable Sales %(4.8%) 0.5%
Gross Profit Margin %20.5% 20.9%
GAAP Operating Income %3.8% 1.6%
Adjusted Operating Income %5.0% 4.9%
GAAP Diluted EPS ($)$2.12 $0.54
Adjusted Diluted EPS ($)$2.72 $2.58

Segment Breakdown (Q4)

SegmentRevenue ($USD Millions)Gross Profit ($USD Millions)Gross Profit %SG&A ($USD Millions)Operating Income ($USD Millions)Operating Income %
Domestic Q4 FY24$13,410 $2,742 20.4% $2,069 $512 3.8%
Domestic Q4 FY25$12,715 $2,654 20.9% $2,039 $147 1.2%
International Q4 FY24$1,236 $259 21.0% $202 $49 4.0%
International Q4 FY25$1,233 $264 21.4% $194 $70 5.7%

KPIs

KPIQ4 FY24Q4 FY25
Domestic Comparable Sales %(5.1%) 0.2%
International Comparable Sales %(1.4%) 3.8%
Domestic Comparable Online Sales %(4.8%) 2.6%
Domestic Online Revenue ($USD Billions)$4.99 (approx. implied by mix, prior text not disclosed)$5.02
Domestic Online Revenue as % of Domestic Revenue38.0% 39.5%

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
Revenue ($B)FY26N/A$41.4–$42.2 New
Comparable Sales (%)FY26N/A0.0%–2.0% New
Adjusted Operating Income Rate (%)FY26N/A4.2%–4.4% New
Adjusted Effective Tax Rate (%)FY26N/A~25% New
Adjusted Diluted EPS ($)FY26N/A$6.20–$6.60 New
Capital Expenditures ($M)FY26N/A$700–$750 New
Share Repurchases ($M)FY26N/A~$300, weighted to 2H New
Comparable SalesQ1 FY26N/ASlightly down YoY New
Adjusted Operating Income Rate (%)Q1 FY26N/A~3.4% New
Dividend per Share ($)Ongoing$0.94 (Q3 FY25 announcement) $0.95 (raised 1%) Raised

Note: FY26 guidance excludes recently implemented/proposed tariffs .

Earnings Call Themes & Trends

TopicPrevious Mentions (Q2 FY25 and Q3 FY25)Current Period (Q4 FY25)Trend
AI/Technology initiativesQ2: computing/tablets +6% comps on replacement/upgrade and innovation ; Q3: customers deal-focused, digital merchandising Launching AI-powered search and smarter personalization; Copilot+ AI PCs expected to drive upgrade cycle; app engagement >100M personalized sessions in Q4 Increasing emphasis
Supply chain & tariffsQ2: International gross margin pressured by supply chain costs ; Q3: Best Buy Express rollout added SG&A Tariffs a key headwind; ~1pt comps hit if 10% China tariff persists; Mexico sourcing ~20% exposure; guidance excludes tariffs Rising risk
Product performanceQ2/Q3: computing/tablets strength; appliances, home theater, gaming declines Computing + tablets and services drove comps; appliances/home theater/gaming declined; headphones/TVs improved vs earlier quarters Mixed; computing improving
Services/membershipQ2/Q3: services drove gross margin improvement Services comp +9.9%; paid members ~8M; services/membership neutral to gross profit rate in FY26 after lapping changes Strong but normalizing
Best Buy HealthLimited mentions priorRecorded $475M goodwill impairment; slower market scaling; focus on profitability Negative reset
Marketplace & AdsNot highlighted in Q2/Q3 releasesMidyear launch of U.S. marketplace; Ads capability build, new leadership; expected to contribute to OI rate over time Scaling initiatives

Management Commentary

  • “I am pleased to report better-than-expected sales for the fourth quarter driven by strong growth in computing... We also delivered a better-than-expected adjusted operating income rate for the holiday quarter.” — Corie Barry, CEO .
  • “Our fiscal ’26 priorities… drive omnichannel experience improvements… launch and scale incremental profit streams, including Best Buy Marketplace and Best Buy Ads… drive operational effectiveness and efficiency.” — Corie Barry .
  • “For Q1 FY26, we expect comparable sales to be slightly down to last year and our adjusted operating income rate to be approximately 3.4%.” — Matt Bilunas, CFO .
  • “If the China tariffs… remain at the 10% level for the full year, we believe they would have a negative impact in the ballpark of 1 point of comparable sales… mainly impact quarters 2 through 4.” — Corie Barry .
  • “We ended the year with nearly 8 million paid members, up from 7 million last year.” — Management on membership growth .

Q&A Highlights

  • Tariffs impact and pricing: Management estimates ~1 pt comps headwind at 10% China tariffs; pass-through from vendors likely; pricing adjustments will vary by category and competitive dynamics; not linear if tariff rates change .
  • Sourcing flexibility: Team is modeling SKU-level impacts; diversified exclusive brands manufacturing; ongoing supply chain adjustments with vendor collaboration .
  • Margin/expense leverage: As sales grow, expect core leverage, while investing in Marketplace and Ads; FY26 adjusted SG&A rate planned ~flat vs FY25 .
  • Category outlook: Opportunities in gaming tied to new launches; appliances expected less negative; housing assumed unchanged in guidance .
  • Share and positioning: Q4 share roughly flattish overall; 30-year high in gaming console share for FY25; differentiation matters in cycles with more innovation .

Estimates Context

  • S&P Global/Capital IQ Wall Street consensus estimates for Q4 FY25 and FY26 were unavailable due to data access limits; therefore, explicit comparisons to consensus are not included here. Values retrieved from S&P Global were unavailable due to daily request limits.
  • Management indicated results “exceeded our expectations” for Q4 on revenue and adjusted OI rate, but this reflects internal outlook rather than Street consensus .

Key Takeaways for Investors

  • Adjusted EPS of $2.58 and adjusted OI rate of 4.9% reflect resilient margin execution despite uneven demand; services/membership and digital engagement are key margin drivers .
  • The $475M Best Buy Health impairment resets expectations for that unit; GAAP optics weak in Q4 (EPS $0.54, 47.2% tax rate), but core retail profitability remains intact on an adjusted basis .
  • FY26 guide implies modest top-line recovery (0–2% comps) and stable-to-expanding margin (4.2–4.4% adj OI rate), with back-half weighted growth tied to product launches and initiatives .
  • Near-term risk: tariffs could pressure comps (~1 pt at 10% China) and consumer elasticity; management excluded tariffs from guidance and is preparing mitigants with vendors .
  • Marketplace and Ads are potential multi-year profit streams; expect near-term investment in FY26, with positive OI dollar contribution and longer-term rate expansion .
  • Category mix remains pivotal: computing/tablets tailwind continues (Windows 10 end-of-support, AI PCs), while appliances/home theater/gaming are mixed; watch gaming catalysts in 2H .
  • Dividend increased to $0.95 and ~$300M FY26 buybacks support capital returns; cash from operations $2.098B in FY25 provides flexibility .