Best Buy Declines as Tariff Concerns Outweigh Sales Expansion

(Bloomberg) -- Best Buy Co. fell as much as 5.5% on Thursday, despite reporting quarterly sales that exceeded expectations, as the company faces proposed U.S. tariffs on a wide range of Chinese imports that would lead to higher prices in its aisles.

• Comparable-store sales in the U.S. -- the company’s most-watched metric -- rose 1.3%, beating analysts’ projections. The gadget retailer reiterated guidance for the full year and said profit for the current quarter will fall in a range that’s just about in line with Wall Street’s expectations.

Key Insights

• Hubert Joly, who brought the retailer back from the brink of disaster about seven years ago, is handing the reins in June to his protege, finance chief Corie Barry. She has big shoes to fill, as Joly fended off Amazon’s encroachment, repaired relations with key vendors like Samsung and Microsoft and moved into new areas like smart homes and technology services for seniors.
• There’s no question that Barry’s job is tougher because of a new wave of proposed U.S. tariffs on Chinese goods. The duties have prompted rivals like Walmart Inc. to say they will have to raise some prices, comments that Best Buy echoed Thursday. Earlier levies hadn’t hurt Best Buy much, but Sanford Bernstein analyst Brandon Fletcher says it’s among the most exposed given the new list’s focus on consumer electronics.
• To offset the tariffs, Barry will have to lean more on new services like the company’s Total Tech Support, which promises to fix any product no matter where it was bought for a $200 annual fee. Best Buy also has a growing army of advisers who make house calls to recommend everything from TVs to security systems. Joly called out the quarter’s “better-than-expected profitability” amid the new strategy push.
• In a call with investors, the company said it’s “premature” to comment on the proposed levies. Best Buy officials said they’ll be “actively engaged” with the Trump administration to minimize the tariffs’ impact on consumers.

Market Reaction

• Best Buy fell as much as 5.5% to $65.38 on Thursday, the lowest intraday level in almost three months. The shares had gained 31% this year through Wednesday’s close.

Get More

• For more on the numbers, click here.
• For the company statement, click here.

To contact the reporter on this story: Matthew Boyle in New York at mboyle20@bloomberg.net

To contact the editors responsible for this story: Crayton Harrison at tharrison5@bloomberg.net, Jonathan Roeder, Lisa Wolfson

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