Best Buy is expected to log its best quarter for comparable sales in the third quarter, according to analysts, lifted by strong sales of the Nintendo Switch 2.
A key metric called comparable sales growth is expected to rise between 1.6% and 3.0% from a year earlier in the third quarter, the best since 2022, analysts surveyed by Bloomberg estimated.
Best Buy tends to do well when new electronics hit the shelves. More than a third of consumers surveyed said they had pre-ordered the Nintendo Switch 2, with Best Buy second in terms of shares of pre-orders, after Walmart, according to Brad Thomas, an equity research analyst at KeyBanc Capital Markets.
When Best Buy reports its third-quarter results, expected on Nov. 25, the company is expected to announce a strong back-to-school sales season, as momentum in demand for computing, tablets, and phones persists. Net income is expected to come in at $290 million, compared with $273 million a year earlier. That would amount to $1.37 a share, compared with $1.32 a year ago.
It would look to maintain any of that momentum into the fourth quarter, which is typically the most important one for retailers.
“Stronger sales would be a positive signal for further growth for the pivotal holiday season,” said Lindsay Dutch, Senior Industry Analyst at Bloomberg Intelligence, in a research note.
U.S. consumers are expected to pull back, especially on discretionary goods, because of economic uncertainty and higher prices. Best Buy faces intense competition from companies like Amazon and Walmart, which have a strong online presence and the ability to offer lower prices.
“We believe the discretionary nature of Best Buy’s business, as well as online, mass competition, makes for a challenging environment,” said Scot Ciccarelli, Managing Director and Senior Equity Research Analyst at Truist Securities, in a research note. “However, the company has shown that when there is product innovation in the consumer electronics space, they can still lead the market.”
The company’s shares have fallen 11.4% this year, significantly underperforming the S&P’s 15% gain, showcasing analyst concerns about the company’s ability to navigate the economic uncertainty and the long-term competitive position.
Best Buy sources its products from China, Taiwan, and India, making the company vulnerable to tariff costs. Still, the company expects its operating margin to be approximately 3.7% in the third quarter, the same as it was last year. In the first half of the year, levies had a minimal impact, and the gross margin averaged 23.3%, slightly below the level of last year.