Best Buy's Q2 Earnings Beat, Enterprise Comparable Sales Up 1.6% Y/Y

Best Buy Co., Inc. BBY reported second-quarter fiscal 2026 results, wherein revenues and earnings surpassed the Zacks Consensus Estimate and the former also rose year over year. The company reiterated its guidance for fiscal 2026.

Best Buy remains committed to its strategic roadmap, which focuses on elevating the omnichannel experience of customers, scaling revenue streams, such as its Best Buy Marketplace and Best Buy Ads, and boosting operational efficiency to fund long-term investments and offset external pressures.

Insight Into BBY’s Quarterly Performance

Adjusted earnings of $1.28 per share surpassed the Zacks Consensus Estimate of $1.22. However, the bottom line fell from $1.34 per share reported in the year-ago period.

Enterprise revenues were $9,438 million, surpassing the consensus mark of $9,202 million and jumping 1.6% from the prior-year quarter's figure of $9,288 million. Enterprise comparable sales rose 1.6% year over year.

Best Buy Co., Inc. Price, Consensus and EPS Surprise

Best Buy Co., Inc. price-consensus-eps-surprise-chart | Best Buy Co., Inc. Quote

Gross profit edged up 0.4% to $2,194 million, while the gross margin fell 30 basis points (bps) to 23.2%. We had projected adjusted gross margin to remain flat year over year. 

Adjusted operating income was $369 million, down 3.1% from the year-ago quarter. The adjusted operating margin of 3.9% fell 20 bps from the prior-year period. We had expected the adjusted operating margin to shrink 50 bps.

Adjusted selling, general and administrative (SG&A) expenses were $1,825 million, up 1.1% year over year. Adjusted SG&A, as a percentage of revenues, were down 10 bps to 19.3%. We had estimated adjusted SG&A expenses to deleverage 50 bps.

BBY’s Domestic & International Operations

Domestic revenues of $8,698 million inched up 0.9% year over year due to a comparable sales rise of 1.1%. From a merchandising perspective, the major drivers on a weighted basis were gaming, computing and mobile phones, somewhat offset by declines in home theater, appliances, tablets and drones. We had projected Domestic revenues of $8,539.5 million and a comparable sales decline of 0.6%.

Domestic online revenues of $2.86 billion increased 5.1% on a comparable basis, and as a percentage of total Domestic revenues, online revenues were 32.8%, higher than 31.5% last year.

The domestic gross margin fell 10 bps to 23.4%, due to lower product margin rates, which were partly offset by rate improvement in the services category. The lower product margin rates were mainly owing to an increased sales mix of lower-margin categories. The segment’s adjusted operating income was $351 million, down 3.6% from $364 million recorded last year. As a percentage of revenues, the metric contracted 20 bps to 4%.

International revenues of $740 million increased 11.3% year over year due to a comparable sales rise of 7.6% and revenues from Best Buy Express locations opened in Canada after year-earlier quarter. We had projected International revenues of $660.9 million and a comparable sales decline of 0.4%.

International gross margin contracted 210 basis points to 21.8%, primarily due to lower product margin rates. The segment’s adjusted operating income was $18 million, up 5.9% from $17 million recorded in the year-ago quarter. As a percentage of revenues, the metric contracted 20 bps year over year to 2.4%.

BBY’s Financial Snapshot

Best Buy ended the quarter with cash and cash equivalents of $1,456 million, long-term debt of $1,164 million and a total equity of $2,716 million.

During the quarter under review, the company returned $266 million to shareholders, comprising $201 million in dividends and $65 million in share repurchases. On a year-to-date basis, BBY returned $568 million to shareholders via dividends of $403 million and share repurchases of $165 million. The company anticipates spending roughly $300 million on share repurchases during FY26.

The company’s board has authorized the payment of a regular quarterly cash dividend of 95 cents per share, payable Oct. 9, 2025, to shareholders of record as on Sept. 18, 2025.

Best Buy Maintains FY26 View

For the fiscal third quarter, BBY expects comparable sales growth to remain similar to the reported quarter and the adjusted operating margin to be similar to the year-earlier quarter’s 3.7% rate. 

Management is confident about the plans for the back half of the fiscal year. Given the uncertainty surrounding potential tariff impacts in the back half, both on consumers and business, it reiterated fiscal 2026 view. At this point, the company believes that it is trending toward the higher end of its sales range.

Management still expects revenues between $41.1 billion and $41.9 billion. BBY continues to forecast comparable sales in a range of down 1% to up 1%.

It foresees adjusted operating margin to be approximately 4.2%, with an adjusted effective income tax rate of nearly 25%. Best Buy continues to envision adjusted earnings per share between $6.15 and $6.30. Capital expenditures are still projected at around $700 million for the fiscal year.

Over the past six months, this Zacks Rank #3 (Hold) company has lost 18.3% compared with the industry’s 21.7% drop.

Key Picks

Levi Strauss & Co. LEVI, designer and marketer of jeans, casual wear and related accessories, currently sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here. 

The consensus estimate for Levi Strauss’ current financial-year EPS indicates growth of 4% from the year-ago figure. LEVI delivered an average earnings surprise of 25.9% in the trailing four quarters.

Genesco Inc. GCO operates as a retailer and wholesaler of footwear, apparel and accessories, carrying a Zacks Rank #2 (Buy) at present. GCO delivered a trailing four-quarter earnings surprise of 32.4%, on average.

The Zacks Consensus Estimate for Genesco’s current fiscal-year EPS and sales indicates growth of 66% and 1.7%, respectively, from the year-ago period’s reported figures.

Allbirds, Inc. BIRD, a lifestyle brand, currently has a Zacks Rank of 2. The company delivered a trailing four-quarter earnings surprise of 20.7%, on average.

The Zacks Consensus Estimate for BIRD’s current financial-year EPS indicates growth of 18.3% from the year-ago figure. 

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This article originally published on Zacks Investment Research (zacks.com).

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