Best Buy Earnings: Top-Line Challenges Offset by Profitability Progress; Shares Slightly Cheap

Narrow-moat Best Buy reported OK fiscal 2025 first-quarter results, with $1.20 in adjusted earnings per share edging our $1.04 estimate despite $8.85 billion in sales missing our $8.96 billion estimate. While the firm is executing ably from a strategic and operations perspective by investing in store renovations, leaning into core competencies with specialized labor and services touch points, and working to reduce operating costs, it remains saddled by a challenging macroenvironment and broader consumer pressure. This was best seen in the appliances segment, where comparable-store sales fell 18.5% despite a weak comparison with the year-ago period, attributable to high interest rates, broader consumer malaise, and an uptick in category promotional activity industrywide. While we expect improvement over the balance of the year in the consumer electronics category, driven by laptops in particular, our relatively dour outlook for personal consumption spending over the next few quarters suggests that the firm will not see a return to meaningful comparable-store sales growth until 2026.