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Dive Brief:
Navigating an evolving global trade environment, Best Buy’s first-quarter revenues declined 0.9% year over year to $8.8 billion, according to a Thursday press release.
Best Buy’s net earnings decreased nearly 18% to $202 million and operating income dropped about 30% to $219 million.
The electronics retailer lowered its guidance due to evolving tariff policies. Best Buy now expects a revenue range from $41.1 billion to $41.9 billion, down from the previously anticipated range of $41.4 billion to $42.2 billion. Comps are expected to range from a 1% decline to 1% in growth, compared to a previously predicted range of flat to up 2%.
Dive Insight:
The electronics industry is particularly exposed to heightened tariff rates on goods from China, which Best Buy is grappling with.
“Our underlying working assumptions are that tariffs stay at the current levels for the rest of the year, and there is no material change in consumer behavior from the trends we have seen in recent quarters,” CFO Matt Bilunas said in a statement. “As you can imagine, and based on our history, we will continue to scenario-plan and adjust with agility as the situation evolves.”
China continues to be Best Buy’s top source for products, CEO Corie Barry said, but the estimated percentage of product costs it represents has dropped from 55% in March to approximately 30% to 35%.
Barry attributed this change to vendors using production capabilities in several countries and utilizing a variety of sourcing options. The retailer has made related promotional and price adjustments to its assortment as of mid-May — a scenario that Barry predicted could happen during a Q4 earnings call in March.
Best Buy’s guidance update comes less than 24 hours after the U.S. Court of International Trade issued an injunction on several executive orders from the Trump administration that used various national emergencies to issue heightened tariff rates. On a Thursday call with analysts, Barry acknowledged the development last night could have a future impact, though prepared remarks were unchanged.
Domestic revenue was down 0.9% in Q1, mainly driven by a 0.7% decrease in comparable sales, with home theater, appliances and drones merchandise categories taking the biggest hits. This was partially offset by growth in categories such as computing and mobile phones. International revenue also decreased, dropping 0.6%, due in part to negative foreign currency impact.
Best Buy also reported $109 million in restructuring charges for the quarter due to “a restructuring initiative within the company’s Best Buy Health business,” per the release.
Some of Best Buy’s obstacles may be more inherent to overall category trends, particularly a lack of innovation or interest in some electronics.
“In areas like TVs, and even smartphones, improvements are so incremental and inconsequential that it is very difficult to get consumers to splurge on the latest technology,” Managing Director of GlobalData Neil Saunders said in comments emailed to Retail Dive. “This also applies to AI-powered computers, which some made a big play about driving demand. From all our data, we simply do not see huge consumer interest here. It is the usual case of technology industry naval gazing rather than understanding what consumers actually want.”
In January, Best Buy announced it plans to launch a digital marketplace this summer where third-party sellers can integrate their product assortment onto the retailer’s website and mobile app. Barry mentioned on Thursday’s call that the company is still on track for a mid-year launch and that the marketplace will be even more important given the current economic environment.