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Best Buy's Comparable Sales Guidance Implies Growth Slow Down in Second Half, Wedbush Says

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Best Buy's Comparable Sales Guidance Implies Growth Slow Down in Second Half, Wedbush Says

Best Buy (BBY) second-half comparable sales guidance pointed to a sequential deceleration in growth, although the outlook appears to be achievable amid continuous strength in the mobile and emerging product categories, according to Wedbush Securities.

Outgoing chief executive, Corie Barry, said during a Thursday conference call that the electronics retailer expects enterprise comparable sales to increase by 1% to 3% for the second half of fiscal 2027, according to a FactSet transcript. The current consensus on FactSet is for same-store sales to rise by 2.1% each for the third and fourth quarters.

The metric grew 4.1% in the previous three-month period, which Wedbush believes was roughly in line with to modestly ahead of buy-side expectations, it said in a Friday client note. "The flow-through was less-than-expected due to elevated incentive compensation from the strong sales beat," analysts, including Matthew McCartney, said.

The brokerage expects Best Buy to meet its guidance amid persistent strength in the mobile and emerging product categories, improvement in big-ticket spending and continued contributions from ads and marketplace.

"That said, we believe risk/reward is adequately priced at these levels when we consider the uncertain impact rising computing prices could have on the consumer and the prospect of tariff-refund-driven promotional intensity during the holiday period," according to McCartney.

Wedbush believes the guidance doesn't fully reflect the strength of Best Buy's second-quarter results, with sales growth in the computing category to slow in the second half. Incoming Best Buy CEO Jason Bonfig told analysts on Thursday that the retailer will be lapping two years of growth in a "particularly strong" prior-year third quarter, which included tailwinds from the end of support for the Windows 10 operating system.

Best Buy continues to tackle impacts from memory cost increases across the industry, with increasing product expenses and high prices flowing into its assortment, according to Bonfig, who is set to take over the top role on Nov. 1. The average selling price growth in computing was in the mid-teens in the second quarter, while units were down by high-single-digits, he added.

"We also have tools across trade-in, credit card financing and strategic promotions to help ease this impact on price increases," Bonfig said on the Thursday call. "This is a dynamic situation, and we will continue to partner closely with our vendors to mitigate impacts."

Wedbush maintained its neutral rating on Best Buy's stock and its 12-month price target of $85.

Shares of the company were down 0.7% in Friday trade, although the stock has gained 24% so far this year.

Last week, retail giant Walmart (WMT) reported better-than-expected fiscal second-quarter results, although US comparable sales growth decelerated more than Wall Street projected amid a pharmacy-related headwind. Target (TGT) lifted its full-year outlook as tariff refunds helped double the retailer's fiscal second-quarter earnings year over year.

Price: $83.10, Change: $-0.46, Percent Change: -0.55%

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