Best Buy’s Stock Struggles as Tariff Concerns Mount: What’s on the Horizon?

Best Buy Faces Challenges Despite Positive Earnings Report

Best Buy’s Stock (NYSE: BBY) experienced a surprising setback on March 4, plummeting 13%, despite surpassing estimates in its fourth-quarter earnings report for the period ending February 1. This decline outpaced the broader market, with the S&P index slipping about 1.2% on the same day. Best Buy’s drop underscores the difficulties within the consumer electronics retail sector, which is grappling with tough comparisons following a pandemic-driven sales surge. The backdrop of rising inflation and potential price hikes due to tariffs further clouds the retailer’s outlook. Investors remain wary of the company’s profitability and consumer demand as it navigates this shifting landscape. For further insights, click here to see how inflation may impact the S&P 500.

In its Q4’25 financial results, Best Buy reported a 5% year-over-year revenue decline, totaling $13.95 billion. Earnings per share dropped significantly to $0.54, down from $2.12 in the same quarter last year. However, after adjusting for a non-cash goodwill impairment charge and restructuring initiatives, adjusted earnings reached $2.58 per share. Notably, the company’s comparable sales rose by 0.5%, which contrasted sharply with a 4.8% decline in Q4’24, excluding the extra week included in fiscal 2024. This performance surpassed Best Buy’s guidance, which had initially predicted flat to down 3% change. In the U.S., comparable sales also showed resilience, increasing by 0.2% year-over-year.

Image by Monoar Rahman Rony from Pixabay

Tariff Implications for Best Buy

The imposition of new 25% tariffs on imports from Mexico and Canada, along with a doubling of tariffs on Chinese goods to 20%, will likely have significant ramifications for Best Buy. China and Mexico account for approximately 55% and 20% of the company’s supply chain, respectively. Consequently, these tariffs could increase costs for the retailer as vendors are expected to pass on tariff-related expenses to consumers. Best Buy’s direct imports represent only 2-3% of its products.

With a six-week inventory cycle, Best Buy anticipates the pricing effects of these changes will mainly occur during the second to fourth quarters of the fiscal year. Investors should brace for potential impacts on financial performance and consumer demand as the full consequences of the tariffs and pricing adjustments emerge.

Over the past four years, BBY stock performance has fluctuated, though it has shown considerably less volatility compared to the S&P 500. The year-by-year returns were 4% in 2021, -17% in 2022, 3% in 2023, and 14% in 2024. In contrast, the Trefis High Quality (HQ) Portfolio, which consists of 30 stocks, has exhibited lower volatility and comfortably outperformed the S&P 500 during the same period.

Future Outlook for Best Buy

To enhance product sales and margins, Best Buy is diversifying its services, particularly through Geek Squad and its health sector offerings. This initiative, along with the expansion of membership programs, has led to growth, pushing gross margins to 22.6% for FY 2025, up from 22.1% the previous year. Furthermore, adjusted operating margins saw a growth of 10 basis points to 4.2% in the same timeframe. Future growth is anticipated through strategic initiatives such as expanding Best Buy Express in Canada and launching a U.S. marketplace.

Despite these efforts, Best Buy’s appliance division faces challenges due to sluggish U.S. home sales and shifting consumer interests, resulting in an 11.4% year-over-year decline in comparable appliance sales in Q4. Conversely, the international segment witnessed a 4.9% increase in appliance sales for the fourth quarter.

For fiscal 2026, Best Buy has issued full-year guidance projecting revenues between $41.4 billion and $42.2 billion, slightly above the $41.5 billion reported in FY 2025, with comparable sales growth expected between 0% and 2%. Notably, this outlook does not account for the potential repercussions of recent or proposed tariffs. Looking forward, Best Buy anticipates consumer behavior will continue to exhibit the same cautious resilience seen in FY 2025, as persistent high inflation disrupts household budgets and promotes a value-oriented mindset among consumers, especially for costly goods.

We forecast Best Buy’s Revenues to reach $41.4 billion for the full year 2026, representing a slight year-over-year increase. On the profit side, we anticipate adjusted EPS of $6.23. Based on our updated revenue and earnings forecasts, we have adjusted Best Buy’s Valuation to $79 per share, which aligns closely with the current market price.

To see how Best Buy compares to its peers across key metrics, click here for detailed peer comparisons that provide valuable insights into company performance across various industries.

Returns	Mar 2025 MTD [1]	2025 YTD [1]	2017-25 Total [2]
BBY Return	-16%	-12%	130%
S&P 500 Return	-3%	-2%	158%
Trefis Reinforced Value Portfolio	-3%	-5%	651%