Best Buy’s E-Commerce Resilience and Shareholder Returns: A Buy in a Tough Retail Climate?

Best Buy (BBY) has long been a bellwether for the health of the consumer electronics sector, and its recent performance offers a compelling case study in resilience. In a retail environment still reeling from post-pandemic shifts and economic volatility, Best Buy’s e-commerce segment has shown steady growth, with domestic online revenue climbing 5.1% year-over-year in Q2 FY26 to $2.86 billion—a 32.8% share of total domestic revenue [1]. This progress, coupled with aggressive shareholder returns, raises a critical question: Can Best Buy’s strategic agility and valuation metrics justify a “buy” rating in today’s challenging market?

E-Commerce Growth: A Cornerstone of Resilience

Best Buy’s e-commerce success stems from its relentless focus on omni-channel integration. The company has invested heavily in AI-driven personalization, improved store layouts, and labor support, which have collectively boosted customer satisfaction and net promoter scores [5]. For instance, its “buy-online-pickup-in-store” (BOPIS) and curbside pickup services now account for 32% of domestic revenue [1], a testament to its ability to blend digital convenience with physical retail’s human touch.

While competitors like Walmart and Target rely on sheer scale and logistics, Best Buy differentiates itself through specialized in-store consultations and a curated loyalty ecosystem. Its 100 million loyalty members, including 8 million paid subscribers, benefit from personalized app experiences and exclusive offers [4]. This hybrid model has helped Best Buy reverse a multiyear sales decline, with enterprise comparable sales rising 0.5% in Q4 FY25 [2].

Shareholder Returns: A Double-Edged Sword

Best Buy’s capital allocation strategy has been equally impressive. In FY25, the company returned $1.3 billion to shareholders via dividends and buybacks, and in Q2 FY26 alone, it distributed $266 million [1]. A 1% dividend increase to $0.95 per share and a $300 million annual buyback authorization underscore its commitment to rewarding investors [3]. However, these returns must be weighed against gross margin pressures caused by a shift toward lower-margin product categories [6].

Valuation Metrics: A Bargain or a Trap?

Best Buy’s valuation appears attractive at first glance. Its P/E ratio of 18.45 and P/S ratio of 0.39 suggest a stock priced for modest growth [1]. The PEG ratio, however, tells a more nuanced story. While some sources cite a PEG of 0.90 [6], others report a negative PEG of -1.1x, reflecting concerns about near-term earnings growth [2]. This discrepancy highlights the market’s uncertainty about Best Buy’s ability to sustain its recent momentum.

Comparatively, Walmart (WMT) and Target (TGT) trade at higher PEG ratios (1.96 and 2.6, respectively) [5], suggesting they are either overvalued or expected to grow faster. Best Buy’s manageable debt-to-equity ratio of 1.47 and 22.61% gross margin provide a buffer against macroeconomic risks, but investors must ask: Is the company’s current valuation justified by its strategic initiatives, or is it masking structural challenges in the retail sector?

Strategic Positioning: Can Best Buy Outmaneuver the Giants?

Best Buy’s omnichannel strategy is arguably its strongest asset. Unlike Amazon’s purely digital-first approach, Best Buy’s human-centric model—think in-store tech consultations and AI-enhanced customer service—caters to a demographic that values expertise over speed [4]. Its recent acquisitions, such as Magnolia Hi-Fi and Pacific Sales, have expanded its product offerings and tapped into niche markets [3].

Yet, the company faces headwinds. The $114 million in restructuring charges during Q2 FY26 [1] signal ongoing operational costs, and its Best Buy Marketplace initiative, while promising, is still unproven at scale. Analysts project FY26 adjusted diluted EPS of $6.20–$6.60 [2], but achieving this will require navigating margin pressures and maintaining customer retention in a crowded market.

Final Verdict: A Buy with Caution

Best Buy’s e-commerce growth and shareholder returns are undeniably robust, but they must be viewed through the lens of its strategic execution and valuation realism. The company’s PEG ratio, while mixed, suggests it is neither overhyped nor undervalued—a middle ground that could appeal to patient investors. However, the retail sector’s inherent volatility and Best Buy’s margin challenges mean this is not a “no-brainer” buy.

For those willing to tolerate short-term risks, Best Buy’s focus on innovation, loyalty, and omni-channel integration positions it as a defensive play in a sector where differentiation is key. As the company rolls out its Best Buy Ads and virtual marketplace initiatives, the next 12–18 months will be critical in determining whether its current valuation reflects a sustainable turnaround or a temporary rebound.

Source:
[1] Best Buy Reports Q2 FY26 Results [https://corporate.bestbuy.com/2025/best-buy-reports-q2-fy26/]
[2] Best Buy Reiterates FY26 Outlook; Authorizes Dividend [https://www.rttnews.com/3569922/best-buy-reiterates-fy26-outlook-authorizes-dividend-update.aspx]
[3] Best Buy's Procurement Revolution From Reactive to Strategic [https://procurementmag.com/company-reports/best-buys-procurement-revolution-from-reactive-to-strategi]
[4] Best Buy prioritizes omnichannel experience, returns to sales growth [https://www.customerexperiencedive.com/news/best-buy-omnichannel-experience-sales-growth/741951/]
[5] PEG Ratio For Walmart Inc (WMT) [https://finbox.com/NYSE:WMT/explorer/peg_ltm/]
[6] Best Buy Co., Inc. (BBY) - Stock Analysis [https://portfolioslab.com/symbol/BBY]