Shares of Best Buy climbed after the retailer raised its full-year guidance, bolstered by strong demand for computing equipment, mobile phones and gaming. The results mark its best comparable-sales performance since the pandemic, supported by a broad tech-replacement cycle.
BNN Bloomberg spoke with Michael Baker, managing director and senior research analyst at D.A. Davidson & Co., who said renewed momentum in PCs, gaming and even TV units signals a meaningful turn in consumer electronics demand, though he cautioned the holiday outlook remains challenged by softer U.S. consumer sentiment.
Key Takeaways
- A broad tech-replacement cycle lifted comparable sales 2.7 per cent, Best Buy’s strongest gain since the pandemic.
- Computing and mobile phones led growth, with gaming and renewed TV demand adding incremental support.
- Home theatre shows early signs of recovery on rising TV unit sales, while appliances remain weak.
- Analysts view the holiday outlook as cautious amid soft consumer sentiment and uneven retail spending.
- Risks include tariff pressures, slowing employment trends and margin challenges from online competition.
Read the full transcript below:
MERELLA: Shares of Best Buy are trading higher today after the company raised guidance for the current fiscal year. This quarter’s upbeat results show Best Buy has reversed a revenue slump that lasted from 2022 until May. Michael Baker joins us now, managing director and senior research analyst at D.A. Davidson & Co. Thanks for joining us today.
MICHAEL: Great to be here. Thank you for having me.
MERELLA: So consumers, I guess, are replacing older technology with newer technology. Is this the primary driver of growth for Best Buy?
MICHAEL: Absolutely. It is a product-cycle story. Everyone bought new laptops when COVID hit in early 2020. The replacement cycle for those types of machines is usually about four or five years. So we started to see PCs get better right toward the beginning of 2024, and that’s just accelerating. It’s helped a little bit by the Windows changeover, but generally speaking, this is exactly what we would expect from those product cycles. And now we’re actually getting a bit of a benefit in other areas, like gaming. The iPhone 17 is actually a surprisingly strong phone. And probably most importantly, from an incremental standpoint, we got TV units positive for the first time in about four years this quarter. Dollars are still down because people are trading down to lower-end TVs, but units were positive.
MERELLA: Is AI demand part of this? People want the newer technology for AI?
MICHAEL: Helping a little bit, sure. But even without AI, I think people would be ready to trade in their laptops as well. So to me, that’s more of an add-on in terms of higher-end features and maybe increasing the average selling price of laptops. People are opting for higher-end laptops that have those AI features. But again, we think it’s more about the typical product cycle for laptops. They get old, they break, and usually four or five years is the life cycle until you’re ready for a new one.
MERELLA: All right. So what about appliances and the home-entertainment department for Best Buy?
MICHAEL: Yes, so the whole entertainment category — in other words, home theatre, that’s what we think about there — and TVs remain negative in dollars, but we saw an important inflection point this quarter, which is that units are up. So that’s the first step to seeing some momentum in that category. Home theatre is about 20 per cent of their business. So if that can start to turn positive on a dollar basis, that’s going to be a huge tailwind. Appliances are a little bit tougher, still negative. We don’t really see a turn in that yet. That’s much more about new-home sales, and we’re not quite there yet for Best Buy. We think at this point Home Depot and Lowe’s and names like that are probably taking some market share in appliances from Best Buy because Home Depot and Lowe’s do better in the break-fix environment. If your appliance breaks, you go to Home Depot or Lowe’s. If you’re doing a remodel, you might opt more for Best Buy. We’re not quite at that remodel cycle yet.
MERELLA: Got it. So the company feels positive about the upcoming holiday season — both Black Friday and Christmas spending. Is that typically a stronger part of the year for this company, given you said they’ve been in a slump for some time?
MICHAEL: Yes. Well, when you say stronger part, it’s where they earn a lot of their money. About 35 per cent of their sales and closer to 40 per cent of their profits come in the fourth quarter. So it is their most important season of the year. Growth depends — it depends on the year. Last year was actually a little bit softer. This year, they have a bit of momentum going in, so we’ll see. To us, it is a tough spending environment out there right now. Best Buy was one of the better reporters, but we have had a lot of misses this third quarter as well. So we’re still a little uneasy about consumer spending. But Best Buy does have some momentum, and again, if last year wasn’t as strong for Best Buy, that does set up an easier comparison. So that does help.
MERELLA: U.S. consumer sentiment is low, as you know. We’ve got sort of that K-shaped look where higher-end consumers are spending and lower-end consumers aren’t spending as much. When you add that in, could this affect the Christmas season for Best Buy?
MICHAEL: We think it could. Again, we’re a little concerned that consumer spending will be on the softer side. We’ve seen a lot of data suggesting some slowing in spending, and I think a lot of that does have to do with slowing employment. So we’re a little cautious on retail sales, particularly at the lower end. You’re right — higher-end consumers are spending. Best Buy really serves all customers, so they have a nice mix of customers. But in general, we are a bit concerned about consumer spending this holiday season. That doesn’t mean spending will be down — certainly not negative — but we just don’t think it will be as positive in general versus last year.
MERELLA: All right. Michael Baker, I’m going to leave it there. I’m out of time. Michael Baker is managing director and senior research analyst at D.A. Davidson & Co. Thanks for your time.
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This BNN Bloomberg summary and transcript of the Nov. 25, 2025 interview with Michael Baker are published with the assistance of AI. Original research, interview questions and added context was created by BNN Bloomberg journalists. An editor also reviewed this material before it was published to ensure its accuracy and adherence with BNN Bloomberg editorial policies and standards.
