Best Buy Company Inc. released third quarter earnings that missed estimates on Tuesday, and one analyst says the company may be in for more pain next year if Donald Trump follows through on his plans to implement steep tariffs on imported goods.
“Over 90 per cent of what (Best Buy sells) is imported. Sixty per cent of it is from China and we estimate another 20 to 30 per cent is from Mexico, particularly in TVs,” Wedbush’s Seth Basham told BNN Bloomberg in a Tuesday interview.
“They have a fair amount of exposure there. We’ve seen this company navigate tariffs in the past with some detrimental affects to their profit and loss statement… we think that there will be negative affects on them if these tariffs do in fact go into effect.”
In a social media post Monday, Trump, who will regain control of the White House in January, said that he intends to impose a 25 per cent tariff on all products from Canada and Mexico on his first day in office, as well as an additional 10 per cent tariff on Chinese goods.
Basham said the tariff scheme, if implemented, would “no doubt” impact retailers across the U.S., adding that it could also lead to “demand destruction” for chains like Best Buy as higher prices lessen the discretionary buying power of already-strained American consumers.
The threat of tariffs aside, Best Buy said on Tuesday that demand for electronics in the U.S. remains sluggish, lowering its full-year guidance after missing on third quarter revenue expectations.
“The company’s comparable store sales were down 2.9 per cent for the quarter. This compares to (previous) guidance, and our consensus forecast of down one per cent,” Basham said.
“Margins held up pretty well to support profitability, so they only missed slightly on earnings per share but they’re grappling with a volatile demand environment and a soft demand environment overall.”
He said preliminary data shows stronger sales performance from Best Buy through the first few weeks of the fourth quarter, which leads into the busy holiday season, but “it’s unclear whether or not that will sustain.”
AI adoption ‘a very slow build’
Basham said that Best Buy, like many U.S. technology firms, is attempting to integrate artificial intelligence (AI) technology into its newest offerings, but it’s “a very slow build.”
“I think we’ll see more indications of it in the fourth quarter and more in 2025, but right now the applications in consumer electronics are pretty limited,” he said.
“There are some laptops that have AI features. The new Apple iPhones have just gotten AI features released, but those aren’t major sales drivers right now.”
With files from Bloomberg News