Best Buy (BBY) could be gearing up for a brutal holiday season as new tariffs from the Trump administration stand to raise the cost of computers, mobile phones, and other tech gear sold at the big box retailer.
Citi analyst Steven Zaccone slashed his rating on Best Buy on Thursday to Neutral from Buy.
“We believe the tech replacement cycle, new AI innovation, and margin execution are positive attributes to the story, but the external backdrop is making for a more challenging environment to execute. We see increasing same-store sales risk in the face of consumer uncertainty as well as higher promotional risk from tariffs,” Zaccone said.
Best Buy stock tanked 10% in premarket trading on Thursday.
Read more about today’s market action following Trump’s tariff announcement.
As of 10:40:37 AM EDT. Market Open.
The president on Wednesday imposed a baseline tariff rate of 10% on all US trade partners, which will go into effect on April 5. Additional tariffs will be placed on countries that the Trump administration considers to be the worst offenders in balance of trade.
The list of offenders includes the key tech component sourcing markets of China and Vietnam. China will see an estimated reciprocal tariff rate of 54%, while Vietnam’s rate clocks in at 46%.
When Best Buy reported earnings on March 14, execs noted that a 10% tariff on Chinese goods would hit same-store sales by one percentage point. But with China’s tariffs as they stand, Best Buy could see a five percentage point hit to sales as consumers balk at higher prices, said Zaccone.
“Best Buy’s product makeup is skewed heavily to the discretionary side of the retail business, which would hurt their top-line if consumers pull back their spend in an uncertain macro environment. While the ongoing consumer electronics replacement cycle will leave some duress purchases intact, we see significant risk to Best Buy’s current guidance,” Zaccone explained.
Read more: What Trump’s tariffs mean for the economy and your wallet
Zaccone now sees Best Buy reporting earnings of $5.80 a share this year, below current analyst consensus estimates of $6.19. Same-store sales are modeled to decline 1.9%.
Here’s where analysts stand on Best Buy’s rating and estimates, according to Yahoo Finance data.
Across the board, the tariffs will cause significant price increases for US consumers, the Consumer Technology Association warned ahead of Trump’s announcement. Laptop prices could surge up to 68%, while smartphone prices could rise by as much as 37%.
Computing giant HP Inc. (HPQ) sells its products in China and relies on the country for key component sourcing. The tariffs could raise material costs and force it to raise consumer prices.
