Best Buy Shares Tumble After Earnings Miss, Tariff Concerns
Despite showing a relatively stable, albeit mixed, Q2 2019 earnings report on Thursday, the market reacted quite negatively to Best Buy’s report. Stocks for the consumer electronics big box store—which ranks second on Dealerscope’s Top 101 CE Retailer list—sank 10 percent. In the report, which was the first quarterly earnings call for new CEO Corie Barry, Best Buy beat earnings per share estimates by 9 cents, but missed on quarterly revenue expectations and same-store sales growth.
Of course, much of the response in the markets was also the result of uneasiness from Best Buy’s standpoint on the impact that the impending tariffs will have on some of their core product categories. Barry noted that several major product categories, including televisions, smartwatches, and headphones, will be impacted by the Trump Administration’s 15 percent tariff that goes into effect on September 1. Other categories will see a similar tariff imposed on December 15, including computing products, smartphones, and gaming consoles.
Those are the dates as of right now. However, as has been the case with this administration and its tariff policies, things could change at any moment—which creates a major headache for retailers like Best Buy as it aims to offer revenue guidance moving forward.
“There is a bit of art and a bit of science to estimating this and we don’t exactly have a precedent for the quantity of moving pieces that we have in place right now,” Corie said in a call with analysts via CNBC. “There’s a few things we are trying to take into account here,” including exactly which goods are on the list, when they will be implemented, and what rates.
All of the key indicators for Best Buy were up in Q2, just not as much as analysts had expected. Adjusted earnings per share were $1.08 compared to a 99 cents estimate; revenue was $9.54 billion versus $9.56 billion estimated; and same-store sales were up 1.6 percent compared to a 2.1 percent increase estimate. Looking ahead, Best Buy raised its earnings forcast for the fiscal year to a range of $5.45 to $5.60 per share, while same-store sales estimates were adjusted to a 0.7 percent to 1.7 percent rise, down from an estimated 0.5 percent to 2.5 percent increase.