Best Buy warns of potential price hikes as fresh US tariffs roll in, shares slump

By Savyata Mishra

(Reuters) -Best Buy warned of the possibility of higher prices for American shoppers as President Donald Trump's new duties came into force on Tuesday, setting the stock for its worst day in nearly five years with a 15% plunge.

The 25% tariffs on imports from Mexico and Canada took effect on Tuesday, while duties on Chinese goods were doubled to 20%.

"The giant wildcard obviously is how the consumers are going to react to the price increases in light of a lot of price increases potentially throughout the year and a general consumer confidence that is showing a little signs of weakness at the moment," CFO Matt Bilunas said on a call with analysts.

U.S. consumer spending fell for the first time in nearly two years in January, with retail sales also dropping by the most in nearly two years, marked by sharp declines at furniture, clothing and electronic retailers.

China remains the number one and Mexico the number two source for products that Best Buy sells, company executives said.

The uncertainty around tariffs overshadowed a surprise rise in comparable sales, snapping 12 quarters of declines, during the all-important holiday quarter.

"The tariff war that moved into higher gear last night is a big overhang," J.P. Morgan analysts said in a note, ahead of the call.

Best Buy's shares were trading at $73.50, and were set for their worst day since March 12, 2020. The stock was the top percentage decliner on the S&P 500 index.

Major U.S. retailers including Target and Walmart have preferred to provide cautious forecasts, citing uncertainty around the levies.

Target CEO Brian Cornell said in a CNBC interview on Tuesday that prices could increase over the next couple of days for seasonal produce such as avocados as the company depended on Mexico "for a significant amount of supply" in those categories.

But if there's a 25% tariff, those prices will go up ... certainly over the next week, Cornell said.

Best Buy expects fiscal year 2026 comparable sales to be in the range of flat to up 2%, largely below analysts' average expectations of a 1.71% rise, according to data compiled by LSEG. The forecast does not include the impact of recently implemented or proposed tariffs.

Adjusted profit per share is estimated to rise in the range of $6.20 to $6.60, compared with expectations of $6.55.

The company's fourth-quarter comparable sales rose 0.5% as customers took advantage of promotions to snap up high-end tablets and television sets. Analysts on average had expected a 1.33% drop.

The company earned $2.58 per share on an adjusted basis, above estimates of $2.40.

(Reporting by Savyata Mishra in Bengaluru; Editing by Sriraj Kalluvila)