Best Buy Q2 FY2026 Earnings Call Transcript

Best Buy Co Inc. (NYSE:BBY) reported second-quarter 2026 adjusted earnings of $1.28 per share on Thursday, beating the consensus estimate of $1.21.

Below are the transcripts from the Q2 earnings call.

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OPERATOR

Ladies and Gentlemen, thank you for standing by. Welcome to Best Buy Co’s second-quarter fiscal 2026 earnings conference call. At this time all participants are in a listen only mode. Later we will conduct a question and answer session at that time. If you have a question, you will need to press Star one on your phone. If you choose to be taken out of the question queue, please press Star one again. As a reminder, this call is being recorded for playback and will be available by approximately 1:00pm Eastern Time today. If you need assistance on the call at any time, please press Star zero and an operator will assist you. I will now turn the conference call over to Molly o’, Brien, Head of Investor Relations. Please go ahead.

Molly O’Brien (Head of Investor Relations)

Thank you and good morning everyone. Joining me on the call today are Corey Barry, our CEO, Matt Bilunas, our CFO and Chief Financial and Strategy Officer and Jason Bonfig, our Chief Customer, Product and Fulfillment Officer. During the call today we will be discussing both GAAP and non GAAP financial measures. A reconciliation of these non GAAP financial measures to the most directly comparable GAAP financial measures and an explanation of why these non GAAP financial measures are useful can be found in this morning’s earnings release which is available on our website investors.bestbuy.com some of the statements we will make today are considered forward looking within the meaning of the Private Securities Litigation Reform act of 1995. These statements may address the financial condition, business initiatives, growth plans, investments and expected performance of the company and are subject to risks and uncertainties that could cause actual results to differ materially from such forward looking statements. Please refer to the Company’s current earnings release and Our most recent Form 10K and subsequent Form 10Qs for more information on these risks and uncertainties. The Company undertakes no obligation to update or revise any forward looking statements to reflect events or circumstances that may arise after the date of this call. And now I will turn the call.

Corie Barry (Chief Executive Officer)

Over to Corey Good morning everyone and thank you for joining us. I want to, and think it’s important to start by acknowledging the horrific shooting that occurred at the Annunciation Church and Elementary School in Minneapolis yesterday morning just a short distance from our corporate headquarters. Our hearts break for the young lives lost and their families who are grieving and our thoughts are with the victims, their loved ones and our community as we process this unimaginable tragedy. And with a deep breath, we will now turn to earnings. Today we are very pleased to report better than expected results for the second quarter on revenue of $9.4 billion. We delivered an adjusted operating income rate of 3.9% and adjusted earnings per share of $1.28. We delivered comparable sales growth of 1.6%, our highest in three years. This was driven by a mix of new technology innovation, our relentless focus on a seamless omnichannel customer experience and our strong vendor partnership. We grew sales in several product categories including gaming computing, mobile phones, wearables and headphones. This growth was partially offset by declines in the home theater, appliance, tablet and drone categories. We reported higher than expected growth in gaming, largely due to our successful Switch 2 release. We saw strong results not only in console sales but also the related peripherals and software. We provided our customers with a smooth experience from the pre order process all the way to getting the console in their hands at midnight on launch day and subsequent post launch inventory drops. There was a lot of customer and employee enthusiasm for our June 5th midnight opening and every store had lines of excited customers waiting to get in. I will add that in addition to Switch 2 growth, we also saw growth in other types of handheld gaming as well as augmented reality glasses. In computing, we delivered our sixth consecutive quarter of sales growth and the Highest number of second quarter laptop unit sales in 15 years. This is due to continued momentum driven by customers need to replace and upgrade products combined with our unique blend of broad assortment and expert advice, service and support. Growth came from across the assortment and across price points. As expected, tablet sales declined as we lapped the strong sales of the new generation iPad that launched in Q2 of last year. Our online sales were 33% of domestic sales in Q2. They grew year over year for the third consecutive quarter due to higher traffic and increased customer adoption of our highly rated app. Customers chose to visit one of our stores to pick up 45% of online purchases and our store pickup, including curbside customer satisfaction metrics continue to improve even as volumes have increased. For the most part, customer shopping behavior in the first half of the year has not changed materially from the commentary we have shared for the past several quarters. Customers continued to be resilient but deal focused and attracted to more predictable sales moments including our Black Friday in July sales event. In the current environment, customers continue to be thoughtful about big ticket purchases and are willing to spend on high price point products when they need to or when there is technology innovation. We delivered yet another year over year increase in our relationship Net Promoter Score which tracks consumers likelihood to recommend Best Buy as well as higher marks from consumers for meeting tech needs like no one else, offering good deals and being a company they can trust. We also saw year over year improvements in associate availability and product availability. I am proud to see the lowest employee Turnover rates in 10 years in addition to the higher engagement scores in our last employee survey. I am inspired by the way our teams have been successfully navigating tariffs even as the backdrop continues to change. The impact during the quarter was basically in line with our expectations and was not material to our Q2 financial results. Our approach is to deliver the right product assortments to match customer needs and budgets while partnering with our vendors. We delivered better than expected results in the second quarter and we feel increasingly confident about our plans for the back half of the year. Given the uncertainty of potential tariff impacts in the back half both on consumers overall as well as our business, we feel it is prudent to maintain the annual guidance we provided last quarter. At this point, we do believe we are trending toward the higher end of our sales range. I am pleased with the progress we are making on our fiscal 26 strategy. As a reminder, our strategy is to continue to strengthen our position in retail as a leading omnichannel destination for technology while at the same time building and scaling new profit streams that we believe will drive returns in the future. Our first fiscal 26 strategic priority is to drive omnichannel experiences that resonate with our customers. We often do this in partnership with our vendors and we have a busy and exciting second half in front of us. This fall we are amplifying our partnership with Meta, bringing AI glasses and expanded experiences to all stores in more than 50 locations. Immersive showcase areas and expert support will allow customers to discover and demo the technology. Ray Ban and now Oakley Meta AI glasses are available. We expect them to be fun and highly giftable products. For holiday in small appliances, we are launching new experiences with brands like Breville and Sharkninja. These will feature expanded assortments to inspire at home, baristas and chefs, and innovative health and beauty solutions. We are also introducing expert sales associates in select locations to bring this innovation to life for our customers. In home theater, we are expanding the merchandising areas featuring TVs from TCL, Hisense and LG. The technologies in focus for TCL and Hisense will be mini LED screens and for LG it will be the latest and most striking OLED screens. Each area will be staffed by a dedicated expert to address any questions and help customers get what they need. In the mobile phone department, we are bringing our new operating model with Verizon and AT&T to more stores. This model gives customers the opportunity to work with expert salespeople like Verizon AT and T or specially trained Best Buy employees who can tap directly into the carrier system. This is resulting in better customer experience and higher sales growth. We will have this in the majority of stores in the back half of the year, which we believe puts us in an even stronger position for the new innovation and phone launches. In gaming, we worked with Nintendo to double the Switch merchandising space in all stores ahead of the June launch. Nintendo not only invested in store merchandising, they also partnered exclusively with us to have game trucks at select stores. These game trucks are physical trailers that allow fans to play the new system and the latest games. In computing, we provide customers with the help and inspiration they need as they upgrade or replace their products. We continue to collaborate with our vendors as new tech and more AI capabilities are released. In fact, we offer 125 models of laptops and desktops featuring enhanced AI capabilities like Copilot plus, with almost 70% of them retail exclusive to Best Buy. They are supported by 16,000 specially trained experts to help customers explore features and applications in daily life. We are also focused on helping customers get what they need to transition to Windows 11 as Microsoft will end support for the Windows 10 operating system this October. After October, customers who have not transitioned will no longer receive new features, technical support or security updates. We believe this is a more significant opportunity than prior end of support examples because there is a large install base of customers who need new devices with more processing power to use Windows 11. In collaboration with Microsoft, we are leveraging personalized marketing, promotions and store associate training to drive product refreshes and support. Our GeekSquad can help customers who need a computer repair to convert instead to an upgraded device. Additionally, Geek Squad can help customers set up and transfer their data to new devices, whether in stores, in homes or remotely. Customers can also trade in their old devices for value they can use to purchase new Windows 11 devices. All the examples of collaboration and vendor investment I just outlined are in addition to the long standing partnerships and in store investment from other large vendors like Apple, LG and Samsung. Many vendors invest not only in training our associates, but also in labor hours to augment our staff. In fact, we expect vendor labor investment to be approximately 20% higher than last year in the second half of this year. This is an important aspect of the Best Buy story. We have relevant traffic, a unique expert sales and service model and physical space that is extremely valuable to our vendors. And we have seen the demand for store presence grow from both our existing vendor base as well as new partners who recognize the value of live interactions for complex conversations. In fact, we just announced a new partnership with IKEA US. We are collaborating with them to pilot 1,000 square foot areas that showcase kitchen and laundry room settings from Ikea and appliances from Best Buy staffed by Ikea coworkers. This experience will launch in 10 stores throughout Florida and Texas, with two of the locations also serving as pickup points for most products that can be purchased on ikea.com this is the first time Ikea products and services will be available through another US Retailer, creating innovative ways for both of us to meet customer needs in a rapidly changing environment. Our second strategic priority for fiscal 26 is focused on incremental profitability streams I’m excited to say that we launched our Best Buy Marketplace last week. We now have six times more products available online for customers than we did before. We have more tech options than ever, both from big names like Samsung, Dell, HP and Intel and new vendors that help us level up our assortment across categories. For example, customers can personalize their gaming setup with products like custom controllers and more options around chairs, keyboards, monitors and headsets. We tripled our mobile phone accessories assortment with more options for cases, screen protectors, chargers and more. We also have hundreds of new brands from fanatics, sports merchandise to Karote cookware in new categories like licensed sporting goods, seasonal decor and much more. With this growing product availability, our upgraded search technology will be important. This new AI search, which we are testing now and expect to roll out by holiday, uses helpful prompts and a See more like this option that guides customers to be more specific, improving their chances of finding what they need. For our sellers, our Marketplace provides an additional avenue to increase their reach and build their brands, leveraging our qualified traffic. Our stores also play a key role in our Marketplace. Customers can return most products purchased through a Marketplace seller at their local Best Buy store. Plus, our Blue Shirt sales associates use an app that makes it easy for them to help customers find products across our wide assortment in store and online, including third party sellers. It also allows them to seamlessly send product links directly into a customer’s online cart. We continue to expect Marketplace to have a positive impact on our operating income rate in fiscal 26. Even after startup costs, investments and estimated cannibalization of our first party product revenue over time, we expect it to help drive profit, dollars and unit share. In addition, it will provide opportunities for Best Buy ads through new advertisers and increased traffic. Our Best Buy Ads team had a productive quarter orchestrating our largest ad campaign ever in combination with our marketing team. It was centered around the theme AI that designed to drive more awareness of the benefits of AI in your everyday life. It included several advertisers and spanned the full advertising funnel including video, social display, owned assets and in store presence. It was successful across a number of fronts. Impressions, clicks, product interactions and units sold all exceeded our expectations. We are planning phase two of the campaign to run as we move into the holiday season. The Best Buy Ads team will host our first ever client showcase on September 16th, spotlighting our scale, performance and innovation to key decision makers across agencies, brands, partners and press. We continue to see fiscal 26 as a pivotal year for Best Buy Ads as we expand into new opportunity areas including agencies, demand side platforms or DSPs and non endemic advertising relationships. We are excited to take our already robust retail media network to a new level in the coming years. We expect growth in ad collections to benefit our gross profit rate in fiscal 26. From an operating income rate perspective, we expect a neutral impact due to the investments we are making in technology and talent. This brings us to our third strategic priority for fiscal 26. It is imperative that we continue our long standing diligence around driving efficiencies and identifying cost reductions to help fund investment capacity for new and existing initiatives and offset pressures in our business. There are many ways we realize these efficiencies. They are often achieved with the help of technology and analytics, through ongoing vendor partnerships and vendor selection throughout the enterprise and by modifying existing processes or customer offerings. Other times they are the result of us moving on from initiatives that aren’t generating the financial return in the timeline we had originally envisioned, such as the exit of our Care at Home Best Buy Health initiative. Today I want to highlight the ongoing modernization of our supply chain which is driving efficiencies and elevating our customer experience. We are implementing a new data driven sourcing solution to choose the most efficient location to fulfill online orders. 40% of all shipped to home units were processed through this new model during the second quarter, delivering cost savings while also improving our on time delivery performance. We are charging at least 70% of all orders to go through this new model prior to holiday with 100% implementation in early 2026. In addition, we have evolved our carrier strategy and FedEx is now our primary national parcel carrier. We are partnering with them to make our supply chain smarter and expect increased integration between us to both improve customer experience and lower costs. For example, just last week we added FedEx real time tracking data into customer order communications across all our FedEx orders. This will provide customers with more timely and accurate updates and should reduce support calls, cancellations and reship costs. With FedEx, we can also expand our national shipping operations, especially for Sunday deliveries, so we can deliver products to our customers even faster than we do today. As you would expect, we are continuing to automate our distribution centers. We are currently outfitting our distribution centers with automated guided vehicles that autonomously move pallets around the warehouse both horizontally and vertically, optimizing warehouse flow and storage. In summary, we are pleased with our Q2 execution and financial results. Our sales momentum has continued into August and our quarter to date. Comparable sales are running in the low single digit range. We are seeing a strong customer response to our back to school sales events. These results demonstrate an important aspect of our ...