Best Buy Co., Inc. (NYSE:BBY) shares fell 3.94% in pre-market trading on Thursday despite the electronics retailer reporting second-quarter earnings and revenue above Wall Street forecasts, as investors focused on operating expenses and margins.
Adjusted earnings per share reached $1.47, exceeding the analyst consensus of $1.35 by $0.12. Revenue increased 3.6% year over year to $9.78 billion from $9.44 billion, ahead of expectations of $9.54 billion.
Comparable sales also performed strongly, increasing 4.1% during the quarter.
Operating costs draw investor attention
Despite the better-than-expected headline results, investors focused on Best Buy’s profitability as higher compensation costs and additional investment in its Marketplace and Best Buy Ads initiatives affected expenses.
The company’s adjusted operating income rate was 4.3%, which came in below some investor expectations.
“We are very pleased to report we outperformed expectations in the second quarter with comparable sales growth of 4.1% and a higher-than-expected adjusted operating income rate,” said CEO Corie Barry. “We drove growth across almost all our major product categories as well as continued strong performance in our Best Buy Ads and Marketplace initiatives.”
Best Buy raises fiscal 2027 outlook
Best Buy increased its adjusted EPS forecast for fiscal 2027 to between $6.70 and $6.90. The midpoint of $6.80 stands above the analyst consensus of $6.62.
The retailer also raised its full-year revenue forecast to between $42.3 billion and $42.8 billion, compared with the consensus estimate of $42.12 billion.
Comparable sales guidance was upgraded more substantially. Best Buy now expects growth of between 1.9% and 3.0%, compared with its previous forecast ranging from a 1.0% decline to a 1.0% increase.
Domestic sales increase as key categories perform well
Best Buy’s Domestic segment generated revenue of $9.07 billion, an increase of 4.3% from the prior-year period, supported by comparable sales growth of 4.5%.
Computing and home theatre were among the categories contributing to growth, alongside emerging products such as AI glasses. Traditional gaming was an area of weaker performance.
Domestic gross margin improved to 24.0% from 23.4% a year earlier. Growth from Marketplace and Best Buy Ads contributed to the increase, alongside $34 million of tariff refunds received during the quarter.
Third-quarter margin guidance remains in focus
For the third quarter, Best Buy expects comparable sales growth of between 1.0% and 3.0%. The company forecasts an adjusted operating income rate of 4.1% to 4.2%.
While margin considerations weighed on the initial share-price reaction, Best Buy’s second-quarter earnings and revenue beat, stronger comparable sales and increased fiscal 2027 guidance provided evidence of improving sales momentum across much of the business.