Best Buy (BBY) Raised Comparable-Sales Guidance but Product Margins Fell. Can Ads and Marketplace Sustain Margin Recovery?

Best Buy Co., Inc. (BBY) released better-than-expected fiscal second-quarter results, with revenue up 3.6% year-over-year to $9.78 billion. Comparable sales grew 4.1%, outpacing the previous year's 1.6% increase. Enterprise gross margin expanded to 23.9% from 23.2%. Domestic gross profit rose 60 basis points to 24.0%, while product margin rates fell.

Growth in Best Buy Ads and Marketplace helped offset the margin decline, along with $34 million in IEEPA tariff refunds. The refund accounted for roughly 38 basis points of the domestic margin boost. Domestic comparable-sales growth accelerated to 4.5%, driven by computing, home theater, and emerging categories like AI glasses and trading cards.

Online revenue totaled $3.00 billion, with comparable online sales up 5.1%, accounting for 33.1% of domestic revenue. Best Buy raised fiscal 2027 comparable-sales guidance to a growth range of 1.9% to 3.0%, up from a prior range of 1.0% decline to 1.0% growth. Marketplace and Best Buy Ads can improve the profit mix, but their associated costs and the tariff refund complicate the margin recovery.

While demand recovery looks genuine, durable earnings growth will rely on newer businesses delivering incremental operating profit as merchandise margins stabilize.