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Best Buy Co., Inc. (NYSE: BBY) reported its third-quarter results for fiscal year 2025, showcasing a mixed performance. The company recorded a total revenue of $9.445 billion, a decline from the $9.756 billion reported in the same quarter of the previous year. This decrease was primarily driven by a 2.9% drop in enterprise comparable sales.

The domestic segment, which constitutes a significant portion of Best Buy’s operations, experienced a 2.8% decline in comparable sales, while the international segment saw a 3.7% decrease. The revenue from the domestic segment was $8.697 billion, down from $8.996 billion, and the international segment’s revenue fell to $748 million from $760 million.

Despite the decline in sales, Best Buy managed to improve its gross profit percentage. The gross profit rate for the enterprise increased to 23.5% from 22.9% in the previous year, indicating better margin management. The domestic segment, in particular, saw its gross profit rate rise to 23.6% from 22.9%. This improvement was attributed to the enhanced financial performance of the company’s services category, which offset lower product margin rates and reduced profit-sharing revenue from its credit card arrangements.

The company’s operating income as a percentage of revenue remained stable at 3.7% on a GAAP basis, slightly up from 3.6% in the previous year. Best Buy reported a GAAP diluted earnings per share (EPS) of $1.26, marking a 4% increase from $1.21 in the prior year. However, on a non-GAAP basis, diluted EPS decreased by 2% to $1.26 from $1.29.
 

Best Buy’s Third Quarter FY’25 Results Fall Short of Expectations

The third-quarter performance of Best Buy fell short of market expectations. Analysts had anticipated an EPS of $1.30 and revenue of $9.64 billion. The actual EPS of $1.26, both on a GAAP and non-GAAP basis, was below the expected figure, indicating a shortfall in earnings performance. Similarly, the reported revenue of $9.445 billion was less than the anticipated $9.64 billion, reflecting weaker-than-expected sales.

Several factors contributed to this underperformance. According to CEO Corie Barry, the latter half of the quarter was impacted by ongoing macroeconomic uncertainties, with customers delaying purchases in anticipation of deals and sales events.

Additionally, the political climate during the run-up to the election created distractions, particularly in non-essential categories, which affected consumer demand. These challenges resulted in softer-than-expected sales, particularly in categories such as appliances, home theater, and gaming.

Despite these challenges, the company managed to deliver an in-line non-GAAP operating income rate. The domestic segment’s gross profit rate improved due to better performance in the services category, which helped offset the decline in product margins.

The international segment also saw an increase in gross profit rate, driven by growth in higher-margin services. However, foreign exchange rates and a decline in comparable sales negatively impacted international revenue.
 

Best Buy Adjusts Financial Guidance for Full Fiscal Year 2025

Best Buy has adjusted its financial guidance for the full fiscal year 2025. The company now expects a decline in comparable sales in the range of 2.5% to 3.5%, a revision from the previous guidance of a 3.0% to 1.5% decline. This adjustment reflects the company’s cautious outlook on consumer behavior and macroeconomic conditions. Despite the anticipated decline in sales, Best Buy is maintaining its non-GAAP operating income rate guidance at 4.1% to 4.2%, indicating a focus on sustaining profitability through cost management and margin improvement.

For the fourth quarter of fiscal 2025, Best Buy projects comparable sales to be flat to down 3% compared to the previous year. The company anticipates a non-GAAP operating income rate in the range of 4.6% to 4.8%. This guidance suggests that while sales may remain challenged, Best Buy is optimistic about its ability to manage operating expenses and maintain profitability. The company is also maintaining its capital expenditure guidance at approximately $750 million for the year.

Best Buy’s updated revenue guidance for fiscal 2025 is between $41.1 billion and $41.5 billion, slightly revised from the prior range of $41.3 billion to $41.9 billion. The company also expects its non-GAAP diluted EPS to be in the range of $6.10 to $6.25, compared to the previous guidance of $6.10 to $6.35. These adjustments reflect the impact of the current economic environment and consumer spending patterns on the company’s financial outlook.

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