Shares of Best Buy (BBY +4.60%) rallied on Thursday after the consumer electronics retailer's profits exceeded investors' expectations.
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Consumers are still buying tech-related products
Best Buy is operating under challenging economic conditions. Consumer sentiment is at record lows, as conflict in the Middle East threatens to keep oil and gas prices high and stoke overall inflation. That's driving many people to cut back on their discretionary spending.
Yet Best Buy was able to grow its revenue by 2% year over year to $8.9 billion in its fiscal 2027 first quarter, which ended on May 2.
NYSE: BBY
Key Data Points
Customers held off on appliance purchases, but these delayed sales were more than offset by higher gaming, computing, and mobile phone revenue.
Moreover, Best Buy's domestic gross margin improved to 23.7% from 23.5% in the prior-year quarter, while its adjusted operating margin rose to 4.1% from 3.8%. The retail giant is expanding its lucrative advertising business and third-party merchant marketplace, which are helping to strengthen its overall profitability.
All told, Best Buy's adjusted earnings climbed 11% to $1.28 per share. That bested Wall Street's estimates, which had called for per-share profits of $1.23.
Shareowners have hefty dividends headed their way
This solid performance and encouraging ongoing sales trends have Best Buy on track to hit its full-year financial targets, which include revenue of $41.2 billion to $42.1 billion and adjusted earnings per share of $6.30 to $6.60.
"Comparable sales have started strong in May, with month-to-date growth up high single digits," chief financial officer Matt Bilunas said.
Management is committed to passing much of these profits on to shareholders via dividends and stock buybacks. Even after today's gains, Best Buy's shares yield a solid 5%.
