Best Buy Earnings Preview: Strong Holiday Sales vs. Tariff Headwinds
2min read Best Buy (NYSE: BBY) is set to report its fiscal Q4 earnings before the market opens on March 4. Analysts expect revenue of $13.69 billion and adjusted earnings per share (EPS) of $2.41, reflecting a year-over-year decline of approximately 6.6% in revenue. While the holiday shopping season was generally strong for electronics, Best Buy’s exposure to discretionary spending trends and e-commerce competition will be key factors in determining its performance.
Key Metrics to Watch
Aside from revenue and EPS, investors will closely monitor:
- Comparable Sales (Comps): Analysts estimate a decline of 1.5%, though Evercore’s estimates suggest a slightly better-than-expected drop of 1%.
- Margins: Best Buy’s ability to manage promotions and vendor-funded discounts will be crucial in protecting profitability.
- Online Sales: Best Buy’s e-commerce segment has lagged behind competitors like Amazon (AMZN), and any continued weakness could further erode investor confidence.
- 2025 Guidance: Given macroeconomic uncertainty and potential tariff impacts, forward-looking commentary will be the most significant part of the report.
Analyst Sentiment and Expectations
Analysts have mixed views on best buy heading into earnings.
- Wedbush expects a strong Q4 print due to a solid holiday season but warns that guidance for 2025 may be soft due to weaker consumer sentiment and high tariff exposure.
- evercore sees a potential downside to $80 per share if the company guides for only modest earnings growth, but also believes strong holiday sales could provide near-term upside.
- Jefferies (JEFF) is bullish on Best Buy’s long-term prospects, citing the company’s marketplace initiative as a potential game-changer. Jefferies has raised its EBITDA estimates by $700 million over the next five years, arguing that Wall Street has yet to fully price in this growth opportunity.
- Evercore (TAP) remains neutral, valuing the stock at $100 based on a 13x earnings multiple.
Tariff Risks Loom Large
Tariffs remain a critical headwind for Best Buy. The company sources about 60% of its cost of goods sold from China, and the proposed 10% tariffs could significantly impact margins. Best Buy has already been shifting some production away from China, but the exposure remains a material risk. Additionally, tariffs on Mexican imports could further squeeze profitability, as Mexico is Best Buy’s second-largest sourcing country.
Industry commentary highlights growing concerns over tariffs. According to a respondent from the Chemical Products sector, "The tariff environment regarding products from Mexico and Canada has created uncertainty and volatility among our customers and increased our exposure to retaliatory measures." A Machinery sector participant added, "Sweeping price increases are incoming from suppliers. Most are noting increases in labor costs, and inflationary pressures are a concern."
Stock Performance and Valuation
Best Buy’s stock has gained 7.3% in the past month, significantly outperforming the S&P 500’s -0.7% decline. The stock is currently trading at around $88.70, with a 52-week range of $69.29 to $103.71. With a price-to-earnings (P/E) ratio of 15.14 and a price-to-earnings-growth (PEG) ratio of 2.10, the stock is trading at a discount to historical levels but still faces significant risks.
Some analysts believe the stock has further upside potential if guidance is better than feared. Evercore sees an opportunity for an 8-10% increase to $95-$100 if holiday sales prove to be a meaningful tailwind. However, others caution that weaker consumer confidence and structural challenges from e-commerce competition could push the stock lower.
Conclusion
Best Buy’s Q4 earnings report will provide a crucial update on the health of the consumer electronics market. Strong holiday sales could help deliver an upside surprise, but macro headwinds, tariff risks, and continued market share losses to e-commerce remain key concerns. While the stock has rallied recently, a weak 2025 outlook could cap further gains and shift investor sentiment. All eyes will be on management’s guidance and how they plan to navigate the challenging environment ahead.