Best Buy Inc. has lowered its annual outlook due to the effects of tariffs on the retailer’s operations and customers. However, the company said on May 29 that it has already adjusted its supply chain and vendor relations to mitigate any impact on retail prices.
Ahead of the opening bell in New York, Best Buy CEO Corie Barry told Wall Street analysts during its earnings conference call that she was proud of the work the Minneapolis-based retailer has done to lower its dependence on sourced products from China, Mexico, and other countries, noting that the “international supply chain is highly global, technical and complex.”
Compared to the previous quarter, Barry said Best Buy has reduced the cost of goods sold tied to products sourced from China to between 30 percent and 35 percent from 55 percent. Trade with Mexico accounts for nearly 25 percent of the cost of goods sold, primarily for televisions and major appliances that comply with the U.S.-Mexico-Canada Trade Agreement (USMCA), she said.
“We review and modify assortments to ensure a wide range of customer needs and budgets are matched and rationalize where appropriate to consolidate volume,” Barry said, noting that the company has changed the mix of its manufacturing locations from which it sources production.
“I want to make the point that due to mitigation efforts by both vendors and by Best Buy, the increased product costs that are flowing to us are lower than the tariff rates.”
Same-store sales decreased 0.7 percent year over year in the quarter, as declines in appliances, home theater, and drones outweighed gains in electronics, computing products, and troubleshooting services in the United States.
In response to the current “dynamic macroeconomic conditions,” Best Buy has lowered its previous outlook for fiscal 2026, which now includes adjusted earnings of between $6.15 to $6.30 per share, down from the prior guidance of between $6.20 to $6.60 per share. The yearly revenue outlook was also revised downward, to $41.1 million to $41.9 million from the previous range of $41.4 million to $42.2 billion.
The company also reduced its capital spending budget from the range of $700 million to $750 million down to the lower end of that scale. Barry mentioned that Best Buy’s revised outlook does not take into account new developments that could affect future earnings and sales after the U.S. Court of International Trade placed a temporary hold on President Donald Trump’s tariff policy.
In response to analysts’ questions about the possibility of higher retail prices ahead, Barry said Best Buy customers remain resilient despite persistent inflation and are making value-focused decisions about new purchases and big-ticket items such as TVs, electronics, and appliances.
“We also still see a customer that is willing to spend on high price point products when they need to, or when there’s technology innovation,” she said.
“We’ve been very clear to say they are making tradeoffs in their spending and budget decisions based on higher prices across many areas of their lives.
“While tariffs are perhaps an additional one, there’s been a great deal of inflation up to this point. So, this isn’t just a conversation about tariffs.”
Bank of America retail analyst Robert Ohmes said the nation’s top specialty retailer of consumer electronics benefited from increased sales in the first quarter, ahead of Trump’s tariff implementation. He believes Best Buy has less pressure to pass on incremental costs from tariffs to customers, even with supply chain exposure to China and Mexico.
“Although Best Buy guidance excludes tariff impact, we think China tariffs decreasing from 145 percent to 30 percent would benefit [the company] as it now has lower pressure to pass on incremental costs,” Ohmes told The Epoch Times via email.
“Most of the Mexico exposure is appliance, private-label brands, and large screen TVs, and they would be exempt from tariffs if USMCA compliant,” he said, referring to the United States-Mexico-Canada Agreement.
After a successful turnaround several years ago, Ohmes said Best Buy has transformed into a hardline retailer with staying power in an increasingly competitive consumer electronics market.
“We believe it is in a strong position in core products and should have opportunities to expand into new categories and services going forward, although a medium-term pullback on discretionary retail categories presents a headwind to both sales growth and valuation,” he said.