Best Buy Q4 Earnings Beat Estimates, Comparable Sales Rise 0.5% Y/Y

Best Buy Co., Inc. BBY has reported fourth-quarter fiscal 2025 results, wherein revenues and earnings surpassed the Zacks Consensus Estimate. However, both top and bottom lines declined year over year.Stay up-to-date with all quarterly releases: See Zacks Earnings Calendar.Best Buy remains focused on strengthening its position in retail as the leading omni-channel destination for technology and expanding its operating income rate. At the same time, the company is building and scaling incremental profit streams, including Best Buy Marketplace and Best Buy Ads, which are expected to drive strong returns.Over the past three months, this Zacks Rank #3 (Hold) company has declined 3.4% against the industry’s 0.1% growth.Best Buy Co., Inc. Price, Consensus and EPS Surprise  Best Buy Co., Inc. price-consensus-eps-surprise-chart | Best Buy Co., Inc. QuoteInsight Into BBY’s Quarterly PerformanceAdjusted earnings of $2.58 per share surpassed the Zacks Consensus Estimate of $2.40. The bottom line fell 5.1% from $2.72 per share in the year-ago period.Enterprise revenues were $13,948 million, which dipped 4.8% from the prior-year quarter's $14,646 million. The figure beat the consensus estimate of $13,664 million. Enterprise comparable sales increased 0.5% year over year.Gross profit dropped 2.8% year over year to $2.92 billion, while the gross margin expanded 40 basis points (bps) to 20.9%. We had projected an adjusted gross margin expansion of 20 bps. Adjusted operating income was $690 million, down 6.1% from $735 million in the year-ago quarter. The adjusted operating margin dipped 10 bps to 4.9%.Adjusted selling, general and administrative (SG&A) expenses were $2.23 billion, down 1.7% year over year. SG&A, as a percentage of revenues, increased 50 bps to 16%. We had estimated adjusted SG&A expenses to deleverage 40 bps.BBY’s Domestic & International OperationsDomestic comparable sales saw a slight increase of 0.2%, while revenues declined 5.2% year over year to $12.7 billion. We expected a 6.9% decline in the Domestic segment's revenues. The revenue drop was largely attributed to an extra revenue week in the fourth quarter of fiscal 2024, which contributed approximately $675 million.From a merchandising standpoint, the primary contributors to the comparable sales increase, on a weighted basis, were computing, tablets and services. However, these gains were partially offset by declines in appliances, home theater and gaming categories. Domestic online revenues were $5.02 billion, reflecting a 2.6% increase on a comparable basis. Online sales accounted for 39.5% of total domestic revenues, up from 38% in the previous year.The domestic gross margin rose 50 bps year over year to 20.9%, primarily driven by improved financial performance in the company’s services segment, including its membership offerings. This increase was partially offset by a decline in profit-sharing revenues from the company’s private label and co-branded credit card programs. The segment’s adjusted operating income was $620 million, lower than the $678 million recorded last year. As a percentage of revenues, the metric declined 20 bps year over year at 4.1%.International comparable sales grew 3.8% year over year, while revenues declined 0.2% to $1.23 billion. The revenue decrease was primarily led by the extra revenue week in the fiscal fourth quarter, which contributed approximately $60 million, along with a negative foreign currency impact of approximately 500 bps. These factors were partially offset by revenues generated by newly opened Best Buy Express locations in Canada in fiscal 2025.This segment’s gross margin increased 40 bps year over year to 21.4% due to lower supply-chain costs. The segment’s adjusted operating income was $70 million, higher than the $57 million recorded last year. As a percentage of revenues, the metric increased 110 bps year over year to 5.7%.BBY Stock Past Three-Month Performance Image Source: Zacks Investment Research BBY’s Financial SnapshotBest Buy ended the quarter with cash and cash equivalents of $1.58 billion, long-term debt of $1.14 billion, and a total equity of $2.81 billion.In the fiscal fourth quarter, the company returned $415 million to shareholders, consisting of $200 million in dividends and $215 million in share repurchases. For fiscal 2025, total shareholder returns were $1.3 billion, including $807 million in dividends and $500 million in share repurchases.The company plans to allocate $300 million for share repurchases in fiscal 2026. Moreover, the board of directors has approved a 1% increase in the regular quarterly dividend to 95 cents per share. The dividend will be payable on Apr. 15, 2025, to shareholders of record as of the close of business on March 25.What to Expect From Best Buy in FY26?For the fiscal first quarter, BBY expects comparable sales to decline slightly year over year, with an adjusted operating income rate of 3.4%. For fiscal 2026, revenues are expected between $41.4 billion and $42.2 billion. BBY projects comparable sales growth of flat to 2% for the year, with stronger growth anticipated in the second half due to the timing of product launches and key initiatives. The enterprise-adjusted operating margin is projected between 4.2% and 4.4%.Adjusted earnings per share is forecast between $6.20 and $6.60, and the capital expenditure is anticipated to be $700-$750 million.Key PicksSome better-ranked stocks are Boot Barn Holdings, Inc. BOOT, Deckers Outdoor Corporation DECK and lululemon athletica inc. LULU.Boot Barn is a specialty retailer of premium, high-quality casual apparel. It sports a Zacks Rank #1 (Strong Buy) at present. You can see the complete list of today’s Zacks #1 Rank stocks here.The Zacks Consensus Estimate for Boot Barn’s fiscal 2025 earnings and sales indicates growth of 21.4% and 14.9%, respectively, from the fiscal 2024 reported levels. BOOT delivered a trailing four-quarter average earnings surprise of 7.2%.Deckers is a leading designer, producer and brand manager of innovative, niche footwear and accessories. It currently flaunts a Zacks Rank of 1.The Zacks Consensus Estimate for DECK’s fiscal 2025 earnings and revenues implies growth of 21.2% and 15.6%, respectively, from the year-ago actuals. DECK delivered a trailing four-quarter average earnings surprise of 36.8%.lululemon is a yoga-inspired athletic apparel company that creates lifestyle components. It has a Zacks Rank of 2 at present. LULU delivered a 6.7% earnings surprise in the last reported quarter. The consensus estimate for lululemon’s fiscal 2025 earnings and sales indicates growth of 12.5% and 9.7%, respectively, from the fiscal 2024 reported levels. LULU delivered a trailing four-quarter average earnings surprise of 6.7%.Only $1 to See All Zacks' Buys and SellsWe're not kidding.Several years ago, we shocked our members by offering them 30-day access to all our picks for the total sum of only $1. No obligation to spend another cent.Thousands have taken advantage of this opportunity. 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