When Best Buy (BBY) opened its doors in 1966, nobody was thinking about shopping online.
Back then people didn’t have computers in their homes — or in their hands.
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Sure, people ordered stuff by mail, but for the most part if you wanted something, you had to walk into a store and say “give me one of those.”
In those days Best Buy was operating as an audio specialty store called Sound of Music and it wouldn’t take on its current handle until 1983.
And the Minneapolis company would grow into the world’s largest consumer-electronics retailer.
Image source: SOPA Images/Getty Images
However, the world was changing as technology continued to advance and the concept of buying online became a reality.
Onset of online shopping
The first secure online retail transaction happened in 1994 and the following year saw the launch of eBay (EBAY) and an outfit called Amazon.com (AMZN) , which is now the largest online retailer on Earth.
Consumer electronics retailers were hit especially hard by the rapid and radical change in people’s shopping habits.
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Electronics typically have thinner profit margins than other retail items, which online retailers exploited.
Shoppers can instantly compare prices on items from several online sources. And unlike with clothing, customers don’t need to inspect most electronics in person before they buy.
In 2024, U.S. brick-and-mortar sales growth lagged e-commerce sales growth by 86%, according to Capital One Shopping Research. A net 7,362 new retail establishments opened in 2024, down 45.2% from 2023 net openings.
Still, most consumers shop at brick-and-mortar locations at least once per week.
Best Buy CEO cites comparable-sales growth
On Aug. 28 Best Buy, home of the Geek Squad, reported fiscal-second-quarter adjusted earnings that beat Wall Street’s expectations.
For the quarter ended Aug. 2, net income was 87 cents a share against $1.34 a share in the year-earlier period. Revenue rose 1.6% to $9.44 billion.
Adjusted profit in the latest quarter was $1.28 a share, beating the analyst consensus compiled by Zacks of $1.22.
Comparable sales grew 1.6%, the company’s 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 partnerships,” CEO Corie Barry said during the earnings call.
The company saw its highest number of second-quarter laptop unit sales in 15 years, due to consumers replacing and upgrading products.
Comparable sales also reflected declines in home theater, appliances, tablets and drones.
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Online purchases totaled 33% of domestic sales in the second quarter, growing from a year earlier for the third straight quarter due to higher traffic and increased adoption of Best Buy’s app, Barry said.
Forty-five percent of online purchases were picked up at the company’s stores.
“Customers continue to be resilient, but deal-focused and attracted to more predictable sales momentum, including our Black Friday in July sales event,” Barry told analysts.
“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,” she added.
Barry warned that given the uncertainty of potential tariff impacts in the second half, “both on consumers overall as well as our business, we feel it is prudent to maintain the annual guidance we provided last quarter.”
BBY shares are down nearly 14% this year and have tumbled 26% from 2024.
Analysts worried about impact of higher prices
Bank of America analyst Robert Ohmes kept his underperform rating on Best Buy and cut his price target to $60 from $63, due to challenging trends in the consumer electronics industry and to uncertainty about the effects of the Trump administration’s tariffs, according to The Fly.
The analyst also lowered his fiscal 2027 forecast of earnings per share to $6.60 from $6.70, citing a weaker near-term outlook and long-term market-share pressure from omnichannel competition.
Wedbush analysts led by Matthew McCartney kept their neutral rating on Best Buy shares and increased their target price to $75 from $70.
“Despite higher prices, tailwinds in gaming and computing indicate the consumer remains willing to spend when presented with compelling new tech, while the company’s efforts to improve its mobile phone selling experience appear to be bearing fruit,” McCartney said.
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The analyst said that better product assortment and pricing actions in TVs and appliances should help stem losses in the second half.
“Longer term, we see growth in Best Buy’s retail media initiative, especially as the US marketplace initiatives ramp,” McCartney said.
Nearer term, he’s still “concerned what the impact of higher prices on everyday items will have on consumer willingness to spend on expensive discretionary electronics.”
The analyst expects pricing headwinds should broadly accelerate in the second half, creating an unattractive near-term risk-reward balance.
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