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Best Buy lowered its full-year guidance due to tariffs but also laid out a five-point plan to curb further damage.
Revenue for the current year is now expected to be between $41.1 billion and $41.9 billion, down from $41.4 billion to $42.2 billion previously. EPS is now guided in the range from $6.15 to $6.30 versus $6.20 to $6.60 under the prior guidance.
“As we stressed last quarter, international trade is critically important for our business and industry,” said Corie Barry, Best Buy’s CEO, on the retailer’s second-quarter analyst call.
Barry cited five “main themes” to reduce the impact of tariffs:
- Leveraging manufacturing flexibility: Barry noted that since 2018, many of Best Buy’s vendors have established new manufacturing locations “that provide optionality.” As a result of recent sourcing shifts by vendors, China-produced imports represent between 30% and 35% of Best Buy’s cost-of-goods sold (COGS), down from 55% estimated on its fourth-quarter call in March.
- Negotiating costs: The retailer is trying to get vendor partners to absorb part of the tariff burden or cost-optimize products. Barry said this includes “consolidating volume into fewer partners for leverage in negotiations.”
- Increasing country diversification: Best Buy encourages many partners to have at least two locations available to manufacture the same or similar products for distribution across the globe to expand sourcing options.
- Adjusting assortments: Best Buy will review and modify assortments to still “ensure a wide range of customer needs and budgets are met and rationalize where appropriate to consolidate volume.”
- Modifying prices: As of mid-May, Best Buy had already made pricing and promotional adjustments, although the outlook reflects plans to remain competitively priced. Barry told reporters that price hikes are “the very last resort.”
Best Buy’s outlook is based on current tariff levels, including about half of China imports facing 30% tariff rates and the remainder facing 20% tariffs due to the Section 232 semiconductor investigation. About 40% of products are sourced from other Asian countries like Vietnam, India, South Korea, and Taiwan, and they face the baseline tariff rate of 10%.
On the positive side, sales growth is expected this year in computing, including tablets and mobile phones, due to the replacement cycle, AI-innovation, and in-store initiatives. Other potential sales drivers include the Nintendo Switch 2 launch and Ray-Ban Meta smart glasses. However, the outlook reflects expectations that consumers remain “value-focused and thoughtful about big ticket purchases” amid continued inflationary pressures, said Barry.
Circana in April predicted that U.S. consumer technology revenue would return to growth this year with a gain of 1.6%, following eight straight quarters of declines. Positive growth is expected in computers and tablets due to upgraded AI capabilities and updated operating systems, as well as in TVs due to a trend toward purchasing larger screen sizes. Gains are also expected within digital cameras, headphones, and health and fitness trackers.
“Consumers remain very price sensitive — something that will be further amplified by uncertainty surrounding potential trade and economic disruptions,” said Paul Gagnon, VP and technology industry advisor for Circana. “The counterpoint in the consumer’s search for value is their need to keep technology products current, and their desire for innovation, albeit at more affordable price points.”