Best Buy Co., Inc. (BBY.US) Q4 performance exceeds expectations but struggles against headwinds. Inflation continues to suppress growth and concerns over tariffs drag down stock prices.

Electronic retailer Best Buy Co., Inc. (BBY.US) released its fourth quarter financial report before the market opened on March 4th, exceeding Wall Street expectations. However, the company stated that due to ongoing consumer constraints from inflation this year, annual sales are expected to remain relatively unchanged. Coupled with the threat of the Trump tariff storm, the stock fell in pre-market trading after the report was released. Data shows that the company's Q4 sales were $13.95 billion, exceeding the market average expectation of $13.69 billion, with adjusted earnings per share of $2.58, surpassing the market average expectation of $2.40. It is worth mentioning that Best Buy Co., Inc. has reversed the trend of declining sales growth for three consecutive years, turning a profit after experiencing 12 consecutive quarters of negative same-store sales growth. Q4 same-store sales jumped 0.50%, compared to the market expectation of a 1.45% decline. Best Buy Co., Inc. CEO Corie Barry stated, "I am pleased to announce that fourth quarter sales exceeded expectations, driven by strong growth in computer products and improvements in sales performance in other categories." The company also reported its full-year performance. Same-store sales for fiscal year 2024 decreased by 2.3%, better than the previously expected decline of 2.5%-3.5%, with Wall Street previously expecting a 2.93% decrease. Total revenue for the year was $41.53 billion, higher than the expected range of $41 billion to $41.5 billion. Adjusted earnings per share were $6.37, exceeding the expected range of $6.10 to $6.25. Looking forward, the company expects same-store sales to change between flat and 2% in 2025, exceeding Wall Street's previous average increase expectation of 1.4%. For the upcoming fiscal year, the company expects revenue to be between $41.4 billion and $42 billion, while Wall Street expects $41.69 billion. Same-store sales are expected to remain flat or increase by up to 2.0%, compared to the previous market estimate of 1.44%. Adjusted earnings per share are expected to be between $6.20 and $6.60, while Wall Street previously estimated $6.55. These performance expectations do not include the impact of tariffs. In pre-market trading, despite investors digesting better-than-expected performance data, Best Buy Co., Inc.'s stock price still slightly declined due to the uncertainty of tariffs and potential continued inflation. As of the time of writing, Best Buy Co., Inc.'s pre-market share price had fallen by 3.74%. As of Monday, its stock price had only risen by just over 1% since the beginning of the year. AI boom drives the "golden time" of replacement cycle Since the post-pandemic period, this retailer has been struggling. During the pandemic, consumers rushed to buy home office equipment and create home entertainment centers, but this trend has faded. Additionally, the tech industry has not yet introduced a blockbuster product that could attract the masses in a way that would change the retailer's trajectory. With the acceleration of innovation in the field of artificial intelligence, the replacement cycle for products such as laptops, tablets, and smartphones is beginning. Evercore analyst Greg Melich said that since the consumer boom began during the pandemic in 2020, this year is in the "golden period" of a four to five-year product replacement cycle. CFO Matt Bilunas stated at the briefing, "We have found that consumers are still willing to buy high-price products when the demand is there or when technology innovation occurs." Barry said, "We are committed to strengthening our position in the retail industry, becoming a leading omnichannel shopping platform for technology products, increasing operating profit margins, and creating and expanding new sources of profit, such as Best Buy Co., Inc. Online Marketplace and Best Buy Co., Inc. Ads, we believe that these measures will bring substantial returns in the future." Chinese and Mexican suppliers facing tariff threats The second round of tariffs initiated by Donald Trump began to be implemented on Tuesday, imposing new tariffs on the top three trade partners of the United States - Canada, China, and Mexico. After a 30-day buffer period, the president imposed a 25% tariff on imported goods from Canada and Mexico, while imposing a second round of 10% tariffs on imported goods from China. Barry told reporters during a third-quarter media conference call, "The profit margins of suppliers in this industry are very low, which means that the vast majority of tariffs are likely to be passed on to consumers in the form of price increases." Around 60% of Best Buy Co., Inc.'s products come from China, making it the second-largest supplier of goods. In the past five years, many companies have shifted production of large products to Mexico, with products manufactured in Mexico including appliances, desktop computers, and large televisions. The company does not import goods from Canada. Other electronic products that may be affected include tablets, smartphones, and some televisions. Best Buy Co., Inc. did not specify what magnitude of price increases may be implemented.