Best Buy Co., Inc. BBY reported third-quarter fiscal 2025 results, wherein both revenues and earnings missed the Zacks Consensus Estimate. Both the top and bottom lines also declined year over year.

Best Buy stock lost 2.6% on Nov. 26, due to soft quarterly results and the lowered view for the fiscal year. However, the company maintained its adjusted operating margin view.

Over the past six months, this Zacks Rank #2 (Buy) company has gained 32.7% compared with the industry’s 23% growth.

An Insight Into BBY’s Quarterly Performance

Adjusted earnings of $1.26 per share lagged the Zacks Consensus Estimate of $1.30. The bottom line fell 2.3% from $1.29 per share in the year-ago period.

Enterprise revenues dipped 3.2% from the prior-year quarter's level of $9,445 million. The figure missed the consensus estimate of $9,631 million. Enterprise comparable sales dropped 2.9% year over year. We had expected enterprise comparable sales to fall 1%.

Best Buy Co., Inc. Price, Consensus and EPS Surprise

Best Buy Co., Inc. price-consensus-eps-surprise-chart | Best Buy Co., Inc. Quote

Gross profit dropped slightly year over year to $2.22 billion while the gross margin expanded 60 basis points (bps) to 23.5%. We had projected adjusted gross margin expansion of 30 basis points. 

Adjusted operating income was $351 million, down from $369 million in the year-ago quarter. The adjusted operating margin dipped 10 bps to 3.7%. 

Adjusted selling, general and administrative (SG&A) expenses of $1.9 billion were flat year over year. SG&A, as a percentage of sales, increased 70 bps to 19.8%. We had estimated adjusted SG&A expenses to deleverage 40 bps.

BBY’s Domestic and International Operations

The Domestic segment’s revenues fell 3.3% to $8,697 million. This year-over-year decline was induced by a comparable sales decrease of 2.8%. From a merchandising perspective, the key contributors to the comparable sales decline were appliances, home theater and gaming. The decline was offset by growth in the tablets, computing and services categories.

We expected a 1.1% decline in the Domestic segment's revenues. The segment’s online revenues of $2.73 billion dropped 1% on a comparable basis. As a percentage of total domestic revenues, online revenues were 31.4% compared with 30.6% last year.

The segment’s gross margin increased 70 bps to 23.6% due to enhanced financial results from the services category, including its membership offerings. This was partly offset by reduced profit-sharing revenues from its private label and co-branded credit card arrangement and low product margin rates. The segment’s adjusted operating income was $338 million, lower than $352 million recorded last year. As a percentage of sales, the metric was flat year over year at 3.9%.

In the International segment, revenues slipped 1.6% year over year to $748 million. This decrease was due to the adverse impact of foreign exchange rates and a 3.7% decline in comparable sales. This is partly offset by revenues from Best Buy Express stores opened in Canada in fiscal 2025. The segment’s adjusted operating income was $13 million or 1.7% of revenues, lower than $17 million or 2.2% reported in the year-ago quarter.

This segment’s gross margin increased 40 bps to 22.5% due to growth in the higher-margin services category.