Best Buy on Thursday reported better-than-expected fiscal second-quarter results and raised its full-year outlook as the company’s recovery showed more signs of taking hold.
The consumer electronics retailer said it saw comparable sales growth of 4.1% during the second quarter, compared with its previous outlook of just 1%, and saw a “higher-than-expected” adjusted operating income rate. Best Buy said it drove growth across all of its major categories, with a surge in computing contributing to that strength.
Best Buy also raised its full fiscal-year financial guidance due to what incoming CEO Jason Bonfig called in the release its “strong first half performance.” The company now expects revenue of between $42.3 billion and $42.8 billion, compared with prior guidance of a range between $41.2 billion to $42.1 billion. It also anticipates comparable sales will climb 1.9% to 3%, compared with prior expectations of between a decline of 1% and increase of 1%.
Still, shares of the company sank about 7% in morning trading Thursday.
Bonfig told CNBC the company hasn’t seen the customer change dramatically, and behavior has instead been “very consistent quarter over quarter.” He added that tech innovation drove customer interest over the quarter, likely contributing to the higher comparable sales figure.
Best Buy said it now expects adjusted earnings per share for the year to be between $6.70 and $6.90, compared with prior guidance of between $6.30 and $6.60 per share.
The company also said its gross profit rate for the quarter included a $34 million benefit from tariff refunds.
Current CEO Corie Barry told CNBC the company was being more explicit than usual about the tariff refunds so the company is well-positioned to operate next year when comparing back to this quarter.
“We are trying to be very transparent so that everyone can easily do the math and understand what those quantities are and still understand the strength of the base business even without those tariff refunds,” she told CNBC.
Here’s how the company performed in its fiscal second quarter compared with what Wall Street was expecting, according to a survey of analysts by LSEG:
- Earnings per share: $1.47 adjusted vs. $1.38 expected
- Revenue: $9.78 billion vs. $9.59 billion expected
For the quarter ended Aug. 1, Best Buy reported net income of $315 million, or $1.48 per share, compared with $186 million, or 87 cents per share, a year earlier. Adjusting for one-time items, Best Buy posted adjusted earnings of $1.47 per share.
Revenue rose 3.6% from $9.44 billion in the year-ago period.
The earnings marked the last quarter of reporting under current CEO Corie Barry. Bonfig will take over the reins of the company on Nov. 1, a leadership change that was part of a broader strategy to accelerate Best Buy’s business.
“The strength of our Q2 results reflects both the deliberate actions we have taken to position the business for growth and a healthy demand environment for our category,” Bonfig said in the release.
The company reiterated that customers continue to spend, though they are still focused on value and sales.
Bonfig told CNBC that Best Buy is seeing higher prices in computing, but the company is focused on changing its assortment to ensure it’s meeting the price points that its customers are seeking.
“We create products to make sure that those price points are covered, which is a little bit different than some of our competitors,” Bonfig said.
Bonfig said the company remains confident in the health of the consumer and is well-positioned in categories including TV, appliances and phones. He added that the launch of Grand Theft Auto 6 in the fourth quarter will drive additional interest in the gaming category.
“We’re very optimistic, but we think the customer continues to be resilient and interested in new technology or finding things within their budget, and we’ll be focused on those sales periods and those deals, which is obviously a big thing as we move into holiday,” Bonfig said.
The consumer electronics retailer has also been hit by tariffs and the soaring price of memory chips. Best Buy said Thursday that it’s continuing to navigate those industrywide challenges and sees customers shopping with specific needs and budgets.
Best Buy has been in a sales slump after it reported declining foot traffic and lower consumer confidence in recent quarters. Bonfig previously told CNBC he’s confident in his abilities to refresh the company and its products and enhance the customer experience.
Part of that strategy has been opening smaller format stores in an effort to expand Best Buy’s presence in areas that can’t sustain a full-sized location. Bonfig also said he plans to leverage artificial intelligence to improve the store experience and corporate processes.
