Best Buy’s First-Quarter Sales Decline as Consumers Cut Spending Amidst Shifting Priorities

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Best Buy Stock

(NYSE:BBY) struggles due to lower consumer spending following the pandemic.

The electronics retailer announced first-quarter 2025 results on Thursday before the market opened. Adjusted earnings per share surpassed estimates at $1.20, but net sales fell to $8.85 billion from $9.47 billion in the same period last year and missed expectations of $8.97 billion for the quarter.

CEO Corie Barry stated that consumer behavior is “uneven,” with a focus on essentials such as food, fuel, and accommodation.

Best Buy experienced a 6.3% decline in total sales in the US, with significant drops in appliances (down 18.5%), entertainment (down 11.3%), and consumer electronics (down 8.3%). However, the computing and mobile phones category declined less than expected at 2.2%, while international sales dipped 3.3%.

Online sales also decreased by 6.1%, accounting for 30.8% of total US revenue, which is slightly higher than the 30.5% from a year earlier.

Barry reported that the service category, including membership offerings, contributed to increased profitability in the US for Q1.

Domestic gross profit margin improved to 23.4% from 22.6% the previous year. However, the company incurred $15 million in restructuring charges due to severance, and Barry highlighted efforts to restructure the workforce to enhance frontline support and simplify leadership structures.

Best Buy reiterated its guidance for overall sales to decline between 3% and 0% for the fiscal year.

Despite concerns about discretionary spending and the uncertain replacement cycle, the company’s stock surged by over 11% on Thursday morning following the earnings report. Analysts such as Steven Zaccone from Citi attribute this gain to improved profitability.

Moving forward, there are concerns about the weakness of the appliance category and potential market share pressure from competitors like Costco. However, Barry expressed optimism about the potential of AI innovation to stimulate the replacement cycle, citing products such as AI-focused PCs and Samsung’s AI-enabled phones.

While preorders for AI laptops exceed initial expectations, Barry acknowledged that overall numbers remain modest as consumers prefer to research and physically interact with the products. The HP EliteBook Ultra AI PC is scheduled to debut on June 18.

Analysts such as Joe Feldman from Telsey Advisory Group anticipate greater momentum as new technology enters the market for the back-to-school season, while Jonathan Matuszewski at Jefferies sees the replacement cycle gaining traction, particularly in consumer electronics, gaming consoles, and home theater systems.

Here’s a summary of Best Buy’s earnings compared to Wall Street estimates:

  • Adjusted EPS: $1.20 versus $1.08
  • Net Sales: $8.85 billion versus $8.97 billion
  • Total US sales: -6.30% versus -5.02%
  • Appliances: -18.50% versus -9.92%
  • Entertainment: -11.30% versus -2%
  • Consumer electronics: -8.30% versus -6%
  • Computing and mobile phones: -2.20% versus -4.17%
  • International: -3.30% versus -3%

The company also provided a revenue outlook for the year, projected to range between $41.3 billion and $42.6 billion, with Q2 same-store sales expected to decline by about 3%.

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