Executive Summary
Executive Summary: Best Buy reported a resilient fourth quarter (Q4 FY2025) with revenue of approximately $13.95 billion and solid profitability in a softer consumer environment. Enterprise comparable sales grew 0.5% for the quarter, aided by strength in computing and tablets and robust doorbuster promotions, while the company preserved profitability, delivering a 4.9% adjusted operating income rate and adjusted EPS of $2.58. On a 52-week basis, BBY achieved a 20 basis point expansion in adjusted operating income rate despite a 2.3% full-year comp decline, underscoring management’s focus on cost discipline, mix, and higher-margin services and digital initiatives. The quarter benefited from a near 40% digital share of domestic sales, with digital channels driving engagement (Best Buy app reaching #1 on the Apple App Store during Black Friday) and a 10% faster delivery promise on average for online orders, while 45% of online revenue was picked up in stores, highlighting the omnichannel value proposition.
Looking ahead, BBY’s FY2026 plan centers on three priorities: (1) driving omnichannel experience improvements; (2) launching and scaling incremental profit streams, notably the U.S. Best Buy Marketplace and Best Buy Ads; and (3) driving operational efficiency to fund strategic investments. Management guided for FY2026 enterprise revenue of $41.4–$42.2 billion with comps flat to up 2% and adjusted operating income margin of 4.2%–4.4%, and adjusted diluted EPS of $6.20–$6.60. The plan explicitly excludes tariff impacts, with management signaling a potential ~1 point drag to comparable sales if China tariffs persist at 10% for the full year, underscoring heightened macro risk. Operationally, BBY outlined a multi-horizon growth framework, including marketplace scale, a richer ads ecosystem, expanded labor investments in key product areas, and a continued emphasis on cost efficiencies and select store reforms.
In sum, BBY delivered a credible Q4 that balanced modest top-line growth with profitability, while laying out a disciplined, growth-oriented roadmap for FY2026 that leverages elevated digital/membership engagement, marketplace monetization, and retail-media capabilities amid tariff and demand headwinds. Investors should monitor tariff developments, the ramp of marketplace/ads monetization, and the company’s ability to translate higher service and first-party data assets into margin improvement over the next 12–24 months.
Key Performance Indicators
QoQ: -38.00% | YoY:-70.27%
QoQ: -57.14% | YoY:-74.57%
QoQ: -56.69% | YoY:-74.18%
Key Insights
Revenue: Q4 revenue of $13.948 billion (roughly $13.95B) with enterprise comp sales up 0.5% for the quarter. QoQ and YoY dynamics reflect 13 weeks in Q4 FY2025 versus 14 weeks in the prior year. The extra week in the prior year contributed approximately $735 million in revenue and about $0.30 of adjusted diluted EPS, providing ~40 basis points of benefit to last year’s Q4 adjusted operating income rate.
Gross Profit: Q4 gross profit of $2.918 billion, implying a gross margin of ~20.92% (0.209...
Financial Highlights
Revenue: Q4 revenue of $13.948 billion (roughly $13.95B) with enterprise comp sales up 0.5% for the quarter. QoQ and YoY dynamics reflect 13 weeks in Q4 FY2025 versus 14 weeks in the prior year. The extra week in the prior year contributed approximately $735 million in revenue and about $0.30 of adjusted diluted EPS, providing ~40 basis points of benefit to last year’s Q4 adjusted operating income rate.
Gross Profit: Q4 gross profit of $2.918 billion, implying a gross margin of ~20.92% (0.2092). Domestic gross profit rate rose 50 basis points to 20.9%; international gross profit rate up 40 basis points to 21.4%. The gross margin mix benefited from services-related improvements but was offset by lower credit card profit sharing revenue.
Operating Income and Margin: Q4 adjusted operating income rate of 4.9%; GAAP operating income of $217 million; adjusted to exclude a $475 million goodwill impairment related to Best Buy Health (as noted by management). For the full year, BBY guided to 4.2%–4.4% adjusted operating income rate for FY2026. Q4 YoY operating income declined ~70% on a reported basis, reflecting seasonality and the extra week in the prior year.
Net Income and EPS: Q4 net income ~$117 million; net income margin ~0.84%. Diluted EPS $0.54; GAAP earnings per share around $0.55.
Cash Flow and Balance Sheet: Net cash provided by operating activities ~$1.537 billion; free cash flow ~$1.359 billion; cash at end of period ~$1.868 billion; total debt ~$4.053 billion; net debt ~$2.475 billion. Strong liquidity but with meaningful leverage (~0.27x debt-to-assets, debt-to-capitalization ~0.59x). Cash flow generation supports ongoing buybacks and dividends, including a quarterly dividend increase to $0.95 per share (12th consecutive year).
Productivity and Mix: Digital share ~40% of domestic revenue; 45% of online revenue picked up in-store; computing, tablets and services led Q4 comparable sales growth (computing/tablets +9% composite; laptops +10% vs Q3). Weakness in appliances, home theater and gaming offset by stronger peripherals and accessories.
Strategic Initiatives and Guidance: The company reiterated three FY2026 priorities: omnichannel improvements, marketplace and ads, and cost/operational efficiency. Enterprise top line expected flat to up 2% with margin expansion supported by Best Buy Ads and Marketplace. Management signaled tariff headwinds could translate into ~1 point drag to comparable sales if China tariffs persist, with no tariff assumption baked into FY2026 guidance. Capex guidance of $700–$750 million and ~$300 million in share repurchases were provided.
Income Statement
| Metric |
Value |
YoY Change |
QoQ Change |
| Revenue |
13.95B |
-4.77% |
47.68% |
| Gross Profit |
2.92B |
-2.77% |
31.62% |
| Operating Income |
217.00M |
-70.27% |
-38.00% |
| Net Income |
117.00M |
-74.57% |
-57.14% |
| EPS |
0.55 |
-74.18% |
-56.69% |
Key Financial Ratios
operatingProfitMargin
1.56%
operatingCashFlowPerShare
$7.2
freeCashFlowPerShare
$6.36
dividendPayoutRatio
170.9%
Management Commentary
Key quotes and takeaways from the earnings call:
- Strategy and execution: Corie Barry stated, “we drove positive enterprise comparable sales growth of 0.5%… On revenue of almost $14 billion, we delivered an adjusted operating income rate of 4.9% and adjusted earnings per share of $2.58.” This underscores BBY’s ability to manage profitability in a softer sales environment and position for FY2026.
- Digital and omnichannel momentum: “digital sales were almost 40% of total domestic sales this Q4, a slightly higher mix than last year… the Best Buy app hit the #1 ranked shopping app position on the Apple App Store on Black Friday… 45% of our online revenue was picked up in our stores.” This highlights strong digital penetration and in-store pickup benefits.
- Tariffs and pricing dynamics: Corie Barry emphasized tariff uncertainty and impact: “Based on our early analysis, if the China tariffs that went into effect on February 4 remain at the 10% level for the full year, we believe they would have a negative impact in the ballpark of 1 point of comparable sales.” The executives reiterated that tariff effects are not fully captured in FY26 guidance and could affect pricing strategy across categories.
- Marketplace and ads as growth engines: The call emphasized “three priorities” for FY26, including “launch and scale incremental profit streams, including Best Buy Marketplace and Best Buy Ads.” Matt Bilunas noted the potential for marketplace and ads to contribute to operating income dollars as the year progresses.
- Health impairment and strategic focus: The team disclosed a $475 million goodwill impairment related to Best Buy Health, while maintaining conviction in the longer-term digital/tech-enabled care strategy.
- Store network and labor strategy: Corie highlighted the continued store health focus, including store resets and selective expansion/relocation, supported by dedicated labor in computing, home theater and major appliances to improve conversion and knowledge transfer.
- Outlook and risk: The question-and-answer segment emphasized the variability of tariffs, potential price pass-through, and the need to balance near-term profitability with long-term investments (ads/mar ketplace) that could drive margin expansion over time.
We drove positive enterprise comparable sales growth of 0.5%. On revenue of almost $14 billion, we delivered an adjusted operating income rate of 4.9% and adjusted earnings per share of $2.58.
— Corie Barry
Based on our early analysis, if the China tariffs that went into effect on February 4 remain at the 10% level for the full year, we believe they would have a negative impact in the ballpark of 1 point of comparable sales.
— Corie Barry
Forward Guidance
Forward-Looking Guidance and Assessment:
- FY2026 targets: Enterprise revenue of $41.4–$42.2 billion; enterprise comps flat to up 2%; adjusted operating income rate of 4.2%–4.4%; adjusted diluted EPS of $6.20–$6.60; capital expenditures of $700–$750 million; share repurchases of approximately $300 million, weighted more toward the second half.
- Margin drivers: Gross profit rate expected to be flat to up ~20 basis points; drivers include growth in Best Buy Ads and the U.S. marketplace. Product margins are expected to flat-to-down slightly versus FY25; services and membership are anticipated to have neutral impact on gross margin. The company expects neutral earnings impact from credit card profit sharing in FY26.
- Tariff risk: Management clearly stated that FY26 guidance excludes tariff impacts and warned of potential ~1 point negative impact to comps if China tariffs persist at 10% for the full year. This introduces a meaningful downside risk that could compress EPS if tariffs persist longer or escalate.
- Earnings momentum and profitability: Higher fixed costs for ads/marketplace are expected to be offset by operating leverage on higher revenue and the contribution from incremental streams, with OI rate expansion anticipated in the medium term as marketplace/ads scale. In Q1, BBY guided to slightly negative comps and a 3.4% adjusted OI rate, with gross margin flat-to-up 20 bps; the company expects to realize leverage from improving sales and continued efficiency programs over the course of FY26.