Best Buy published its second-quarter report for fiscal 2027, and the headlines are good: comparable sales up 4.1%, earnings per share up 70%, and raised guidance.
And inside the release itself there is one sentence that changes how the report reads.
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What This Company Does, and Why It Became Hard
Best Buy is an electronics retail chain - physical stores and a website.
And this is a category whose entire business model has eroded for a decade, for a simple reason: electronics is a standardised product.
A given television is the same television in every store. So the customer can compare prices on a phone while standing in front of the shelf, and that pushes the margin to the floor.
So an electronics retailer that survives usually does so through things that are not selling the product: installation and repair services, memberships, an online marketplace where third-party sellers pay a commission, and an advertising arm that sells manufacturers exposure inside the site.
And that is exactly what is happening here - so the margin line has to be read carefully: it no longer measures only product sales.
The Quarter
| $ millions | The quarter | Year ago | Change |
|---|---|---|---|
| Total revenue | 9,779 | 9,438 | +3.6% |
| United States | 9,070 | 8,698 | +4.3% |
| International | 709 | 740 | -4.2% |
| Operating income | 421 | 251 | +67.7% |
| Net earnings | 315 | 186 | +69.4% |
| Earnings per share | $1.48 | $0.87 | +70% |
| Adjusted earnings per share | $1.47 | $1.28 | +15% |
| Comparable sales | The quarter | Year ago |
|---|---|---|
| Total | +4.1% | +1.6% |
| United States | +4.5% | +1.1% |
| United States online | +5.1% | +5.1% |
| International | -1.8% | +7.6% |
The Gap Between 70% and 15%
GAAP earnings per share rose 70%. Adjusted earnings per share rose 15%.
And here the direction is the opposite of what you see in technology - the GAAP figure is the higher of the two.
And the explanation is simple: a year ago there were restructuring charges of $114 million. This quarter there is a credit of $6 million.
So the year-over-year GAAP comparison mostly measures the absence of a one-off charge from a year ago - not an improvement in the business.
And precisely for that reason the adjusted line, up 15%, is the right number for comparison here. And that is a reminder that the adjusted measure is not always inflated in the company's favour - sometimes it is the one that lowers the headline.
And the Sentence That Changes How the Report Reads
The domestic gross profit rate rose from 23.4% to 24.0%.
And the release details exactly where that came from:
| Growth in the marketplace | Commissions from third-party sellers |
| Growth in the advertising arm | Manufacturers paying for exposure |
| Tariff refunds | about $34 million |
| Partially offset by | "lower product margin rates" |
That last line is the point: selling the products themselves happened at a lower margin.
And the $34 million refund alone equals about 37 basis points on domestic revenue - that is, more than half of the 60-basis-point improvement in the margin.
This does not say the quarter was bad. It says the margin improved because of things that are not selling products - commissions, advertising, and a one-off refund from the state.
The Categories, and What They Say About the Consumer
Per the release, the growth drivers were computing, home theatre, and "a collection of emerging categories such as AI glasses and trading cards" - partially offset by a decline in the traditional gaming category.
| United States | Share of revenue | Comparable sales | Year ago |
|---|---|---|---|
| Computing and mobile phones | 46% | +6.8% | +3.8% |
| Appliances | 12% | +0.2% | -9.2% |
And the computing line connects to something I wrote about two days ago.
HP reported this week computing revenue up 18% - while the number of units sold fell 16%. That is, the average price per unit jumped, mainly because of memory prices.
And Best Buy, sitting at the other end of that same chain, reports comparable sales of 6.8% in computing - and lower product margins.
The two reports are consistent under one reading: the price of a computer to the consumer rose, and part of the cost increase is being absorbed by the retailer, not only by the customer.
And the Positive Side, of Which There Is Plenty
Comparable sales rose 4.1% - against 1.6% a year earlier. That is a real acceleration.
And the company raised full-year guidance on two measures: comparable sales to 1.9% to 3.0%, and adjusted earnings per share to $6.70 to $6.90 - against $6.30 to $6.60 previously.
And particularly interesting: appliances went from minus 9.2% to plus 0.2%. Large appliances are a classic deferrable purchase - a fridge breaks, and you replace it only when you must. Stabilisation in that category is a sign of a consumer willing again to spend on a big-ticket item.
And management describes "a healthy demand environment for our category".
And one more figure worth noting: the international segment fell 1.8% in comparable sales, after a 7.6% rise a year earlier. It is only 7.2% of revenue, so the impact is limited - but the reversal is sharp.
And in the background, a CEO transition: Corie Barry is stepping down, and Jason Bonfig takes over on 1 November 2026.
What I Will Check Next Quarter
| Product margins | The release says they fell - that is the number that decides |
| Tariff refunds | $34m this quarter - one-off by their nature |
| The marketplace and advertising | The two arms carrying the margin |
| Computing | 46% of revenue, and sensitive to component prices |
| The international segment | -1.8% after +7.6% |
| The CEO transition | On 1 November |
הזווית שלי
דעה אישית של אילן אברמוב - לא ייעוץ ולא המלצה
What interests me in this report is not whether the quarter was good - it was - but what exactly in it was good.
Because the gross margin rose, and that is usually the strongest signal a retailer can give. But Best Buy, to its credit, detailed exactly where it came from: commissions, advertising, and a tariff refund. And in the same breath noted that product margins fell.
And that is an accurate description of what is happening to electronics retail in this decade. The business of selling a television at a profit keeps shrinking; the business of being a platform - charging a seller a commission, and selling a manufacturer advertising - is the one that grows.
And what I try to hold onto when reading a retailer is that separation: how much of the profit comes from selling, and how much from being infrastructure for someone else. The second is more stable and higher-margin, but it also depends on the first continuing to bring people in.
And what I would not do is derive the rate of improvement from the $1.48 earnings per share. It rose 70% because a year ago there was a one-off $114 million charge. The right number is 15%, and that is still a good quarter.
And what I do take from this report as a broader insight is the tariff refunds. They appeared last night at Dollar General too - two entirely different chains, the same benefit, and both noting it is not expected to repeat. When trade policy changes direction, it enters one quarter's accounts and leaves them the next - and anyone who does not strip it out is measuring a trend that does not exist.
(It is important to stress: this is my personal opinion only, and nothing herein constitutes a recommendation to take any action.)
