Best Buy Co., Inc. BBY reported better-than-expected second-quarter fiscal 2027 results, with both the top and bottom lines rising year over year. Both metrics surpassed the Zacks Consensus Estimates.
BBY posted adjusted earnings of $1.48 per share, which increased 70.1% from 87 cents a year ago and beat the Zacks Consensus Estimate of $1.37 by 8%.
Best Buy Co., Inc. Price, Consensus and EPS Surprise
Best Buy Co., Inc. price-consensus-eps-surprise-chart | Best Buy Co., Inc. Quote
Revenues rose 3.6% to $9.78 billion from $9.44 billion, topping the consensus mark of $9.56 billion by 2.2%. The performance reflected broad category growth and improved profitability. Enterprise comparable sales increased 4.1% compared with growth of 1.6% in the year-ago quarter.
BBY's Category Trends Support Sales Momentum
Domestic comparable sales advanced 4.5% in the second quarter compared with 1.1% growth a year ago. Computing and mobile phones comps increased 6.8% compared with 3.8%, while consumer electronics rose 5.6% compared to a 5.2% decline in the prior-year quarter.
Services comparable sales grew 6.4% versus 3.7%, and appliances edged up 0.2% compared with a 9.2% decline a year ago. Entertainment fell 6.3% after increasing 39.3% in the prior-year period. Management identified computing, home theater and emerging categories such as AI glasses and trading cards as the largest weighted growth drivers, partly offset by weakness in traditional gaming.
Best Buy's Domestic Business Drives Growth
Domestic revenues increased 4.3% to $9.07 billion from $8.70 billion in the year-ago quarter. Domestic comparable online sales rose 5.1% in the second quarter, matching the rate recorded a year earlier. Online sales represented 33.1% of domestic revenues compared with 32.8% previously.
Domestic gross profit increased to $2.18 billion from $2.03 billion in the reported quarter, while the gross profit rate expanded to 24% from 23.4%. The improvement reflected growth in Marketplace and Best Buy Ads and approximately $34 million of IEEPA tariff refunds, partly offset by lower product margin rates.
BBY's Profitability Improves Despite Higher Expenses
Consolidated gross profit rose to $2.34 billion from $2.19 billion, with gross margin improving to 23.9% from 23.2%. SG&A expenses increased to $1.92 billion from $1.83 billion and represented 19.7% of revenues compared with 19.4% a year earlier.
Operating income increased to $421 million from $251 million, while the operating margin expanded to 4.3% from 2.7%. Adjusted operating income rose to $417 million from $369 million, with the adjusted margin increasing to 4.3% from 3.9%. BBY recorded a $6 million reduction in restructuring charges compared with $114 million of charges a year ago.
Best Buy's International Business Softens
International revenues declined 4.2% to $709 million from $740 million in the second-quarter. Comparable sales decreased 1.8% compared with growth of 7.6% in the year-ago quarter. The company attributed the revenues decline primarily to lower comparable sales and the negative impact of foreign exchange rates.
International gross profit declined to $158 million compared with $161 million, though the gross profit rate improved to 22.3% from 21.8%. Adjusted SG&A increased to $145 million from $143 million and represented 20.5% of revenues versus 19.3%. Adjusted operating income declined to $13 million from $18 million, while the corresponding margin fell to 1.8% from 2.4%.
BBY's Cash Flow and Liquidity Strengthen
For the first six months of fiscal 2027, cash provided by operating activities increased to $1.30 billion from $783 million a year ago. Additions to property and equipment were $344 million compared with $341 million in the prior-year period.
Cash and cash equivalents stood at $2.26 billion at quarter end compared with $1.46 billion a year earlier. Merchandise inventories increased to $6.30 billion from $5.82 billion. During the first six months, BBY paid $405 million in dividends versus $403 million a year ago and spent $36 million on share repurchases compared with $165 million.
Best Buy Raises Fiscal 2027 Outlook
Best Buy raised its fiscal 2027 revenue guidance to $42.3-$42.8 billion from its prior forecast of $41.2-$42.1 billion. Comparable sales are now expected to increase 1.9-3% compared with the previous outlook ranging from a 1% decline to 1% growth.
The company increased its adjusted earnings outlook to $6.70-$6.90 per share from $6.30-$6.60 and raised its adjusted operating income rate forecast to 4.4-4.5% from 4.3-4.4%. Capital expenditures remain projected at approximately $750 million, unchanged from the prior outlook. Management attributed the higher annual guidance to strong first-half performance and momentum entering the second half.
This Zacks Rank #3 (Hold) company’s shares have gained 17% over the past three months, in line with the industry's growth.
Image Source: Zacks Investment Research
Stocks to Consider
Some better-ranked stocks have been discussed below:
FIGS, Inc. FIGS operates as a direct-to-consumer healthcare apparel and lifestyle company in the United States and internationally. The company currently carries a Zacks Rank of 2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
The Zacks Consensus Estimate for FIGS’ current fiscal-year sales and earnings implies growth of 18.2% and 89.5%, respectively, from the year-ago figures. FIGS has delivered a trailing four-quarter earnings surprise of 201.8%, on average.
Fossil Group, Inc. FOSL designs, develops, markets and distributes consumer fashion accessories in the United States, Europe, Asia and internationally. At present, FOSL carries a Zacks Rank of 2.
The Zacks Consensus Estimate for FOSL’s current fiscal-year sales indicates a decline of 4%, while the consensus mark for earnings indicates growth of 96.7% from the year-ago figures. FOSL delivered a trailing four-quarter negative earnings surprise of 236.2%, on average.
Boot Barn Inc. BOOT operates specialty retail stores in the United States and internationally. Boot Barn currently carries a Zacks Rank of 2.
The consensus estimate for Boot Barn’s current fiscal-year sales and earnings implies growth of 15.7% and 22.6%, respectively, from the year-ago figures. BOOT delivered a trailing four-quarter earnings surprise of 11.4%, on average.
7 Best Stocks for the Next 30 Days
Just released: Experts distill 7 elite stocks from the current list of 220 Zacks Rank #1 Strong Buys. They deem these tickers "Most Likely for Early Price Pops."
Since 1988, the full list has beaten the market more than 2X over with an average gain of +23.9% per year. So be sure to give these hand picked 7 your immediate attention.
See them now >>Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report
Best Buy Co., Inc. (BBY): Free Stock Analysis Report
Boot Barn Holdings, Inc. (BOOT): Free Stock Analysis Report
Fossil Group, Inc. (FOSL): Free Stock Analysis Report
FIGS, Inc. (FIGS): Free Stock Analysis Report
This article originally published on Zacks Investment Research (zacks.com).