Best Buy's 2026 Q1 Earnings Call: Unpacking Key Contradictions in Tariffs, Marketplace Strategy, and Advertising Revenue

None



Revenue and Profitability Performance:
- Best Buy reported $8.8 billion in revenue for Q1, slightly below last year, with an adjusted operating income rate of 3.8%.
- The company delivered an adjusted earnings per share of $1.15.
- This performance was due to a decline in certain product categories, particularly home theater, appliances, and drones, despite growth in computing and tablets.

Tariff Impact and Mitigation Strategies:
- Best Buy's supply chain was significantly impacted by tariffs, with China representing about 30% to 35% of COGS, down from 55% previously.
- The company is employing various mitigation strategies, including leveraging manufacturing flexibility, increasing country diversification, negotiating costs, adjusting assortments, and adjusting prices.
- Mitigation efforts have made increased product costs lower than the tariff rates, enabling competitive pricing for customers.

Digital and Omnichannel Growth:
- Online sales grew year-over-year for the second consecutive quarter, representing nearly 32% of total domestic sales.
- Best Buy emphasized the strength of its omnichannel operations, achieving nearly 60% of online purchases delivered or available for pickup within one day.
- This growth is attributed to improved on-time ship-to-home delivery performance and a focus on enhancing the customer experience both online and in-store.

Strategic Priorities and Investments:
- Best Buy is focused on launching and scaling its new profit streams, such as Best Buy Marketplace and Best Buy Ads, and operational efficiencies to offset pressures.
- The company plans to launch a new search experience and storefronts for influencers and creators, aiming to drive increased traffic and engagement.
- These initiatives are expected to positively impact operating income and gross profit rates, adding to the company's long-term growth strategy.