Best Buy Earnings: Retailer Taking Appropriate Steps to Prop Up Results, but Soft Guidance Stings

Narrow-moat Best Buy's guidance suggests another year of sales declines, setting the stage for a more protracted route to recovery than we'd initially contemplated. While we believe that the firm's strategic priorities—investing behind its omnichannel, building customer relationships through its TotalTech loyalty program, and incubating its nascent Best Buy health business—are cogent, we expect to lower our $105 fair value estimate by a high-single-digit percentage on softer fiscal 2024 sales and the operating deleverage that follows. Shares continue to trade at about a 15% discount to our revised intrinsic valuation.