Best Buy Canada saw sales soften in its latest quarter, reversing some of the strong growth recorded earlier in the year as the electronics retailer moves beyond the initial expansion of its Best Buy Express network.
Best Buy Co. reported Canadian revenue of US$709 million for the second quarter of fiscal 2027, ended August 1, down 4.2% from a year earlier. Comparable sales declined 1.8%, compared with growth of 7.6% in the same quarter last year. Best Buy reports its Canadian operations as its International segment.
The Canadian performance diverged from Best Buy’s U.S. business, where revenue increased 4.3% to US$9.1 billion and comparable sales rose 4.5%. Company-wide comparable sales increased 4.1%.
Despite the decline in Canadian sales, gross margins improved. Best Buy’s International gross profit rate increased to 22.3% from 21.8%, primarily due to improved product margins. Adjusted operating income in the segment was US$13 million, down from US$18 million a year earlier, while the adjusted operating margin declined to 1.8% from 2.4%.
Canadian Momentum Slows After Strong First Quarter
The second-quarter decline follows a considerably stronger start to Best Buy’s fiscal year in Canada.
During the first quarter, Canadian revenue increased 7.3% to US$687 million, while comparable sales rose 4.7%. Canada outpaced Best Buy’s U.S. operation on comparable sales growth during the period.
For the first six months of the fiscal year, Canadian revenue remains slightly higher than a year ago at US$1.396 billion, compared with US$1.380 billion. Comparable sales are up 1.3% over the six-month period.
The latest quarter also comes against an unusually strong comparison. Best Buy reported Canadian comparable sales growth of 7.6% during the second quarter a year ago, when the company was benefiting from the expansion of its store network.
A significant part of that expansion came through the rollout of Best Buy Express.
Best Buy Express Reshaped Canadian Store Network
Best Buy Canada and Bell Canada announced a partnership in 2024 to convert former The Source locations into small-format Best Buy Express stores. The network expanded to 167 locations across Canada, including stores in communities where Best Buy previously had no physical presence.
The rollout substantially expanded Best Buy’s Canadian footprint and gave the retailer access to smaller markets that may not support one of its conventional big-box stores.
Best Buy Express combines a curated assortment of consumer electronics with access to Best Buy’s much larger digital assortment. When the rollout began, the retailer said customers would be able to access more than 100,000 products through its fulfillment network, including merchandise not physically stocked in the smaller stores.
The locations also offer Geek Squad services along with Bell, Virgin Plus and Lucky Mobile telecommunications products and services.
With the rollout now part of Best Buy’s comparable sales base, the Canadian operation is entering a different phase. Future performance will increasingly depend on the productivity of the expanded network rather than the incremental sales generated as new Express locations opened.
Small Stores Remain Part of Best Buy’s Growth Strategy
Incoming Best Buy CEO Jason Bonfig highlighted the potential of smaller-format stores during the company’s latest earnings call. His comments addressed Best Buy’s broader strategy rather than the Canadian Express network specifically.
Bonfig said smaller stores allow Best Buy to enter attractive markets that cannot support its traditional store format, extending the company’s reach to additional customers and communities. He said the strategy remains in its early stages, but customer response and performance have been encouraging.
“What is particularly exciting is the way these stores accelerate omnichannel engagement,” Bonfig said.
Customers may begin their relationship with Best Buy through a store visit before moving into its app, digital channels, membership programs and services. Bonfig described the smaller locations as both retail destinations and “customer acquisition engines.”
That strategy has particular relevance in Canada, where the 167-store Express network has significantly extended Best Buy’s physical reach. The locations can serve as access points to Best Buy’s larger assortment and fulfillment infrastructure without requiring the footprint of a conventional electronics superstore.
Best Buy continues to emphasize the importance of its larger stores. Bonfig said the company sees significant value in the format and is reallocating space toward higher-value experiences and emerging technology.
Best Buy Sees Value-Focused Consumer
At the corporate level, Best Buy said customers continue to spend but remain focused on value and particularly responsive to promotional events.
CEO Corie Barry said consumers remain thoughtful about major purchases but are willing to spend on higher-priced products when replacement becomes necessary or technological innovation provides a compelling reason to upgrade.
Computing has been one of Best Buy’s strongest categories, recording its 10th consecutive quarter of positive comparable sales growth. Home theatre was the company’s second-largest contributor to comparable sales growth during the quarter, while emerging categories including AI glasses, trading cards and health rings more than doubled their sales from a year earlier.
Those category results were discussed at the corporate and U.S. level and were not disclosed separately for Canada.
Pricing is also becoming a factor in computing. Best Buy said industry-wide increases in memory costs have been flowing through to product prices. Average selling prices in computing increased by the mid-teens during the quarter while unit volumes declined by the high-single digits.
Bonfig said Best Buy is adjusting assortments with vendors to maintain important consumer price points while using trade-ins, financing and promotions to help customers manage higher prices. The company expects the current computing pricing dynamic to continue through the remainder of the fiscal year.
Best Buy Broadens its Retail Model
Best Buy is simultaneously developing revenue streams beyond conventional consumer electronics sales.
Best Buy Business now generates more than US$1.1 billion annually and grew approximately 15% to 20% during the first half of the fiscal year, according to Barry. The operation serves sectors including education, hospitality, builders and multi-dwelling properties, health care and corporate enterprise.
The growth figures provided on the earnings call were for Best Buy Business overall and were not broken out for Canada.
Best Buy is also expanding its advertising and marketplace businesses as it looks to generate additional revenue and profit from the scale of its retail ecosystem.
Best Buy Raises Full-Year Outlook
The softer Canadian quarter came as Best Buy delivered stronger-than-expected results overall and raised its outlook for fiscal 2027.
Enterprise revenue increased 3.6% to US$9.8 billion, while comparable sales increased 4.1%. Adjusted diluted earnings per share rose 15% to US$1.47.
Best Buy now expects annual revenue of between US$42.3 billion and US$42.8 billion, with comparable sales growth of between 1.9% and 3%. Adjusted diluted earnings per share are forecast at between US$6.70 and US$6.90.
Management said August comparable sales were tracking at the upper end of its expected 1% to 3% range, pointing to encouraging back-to-school demand and the company’s 60th anniversary promotional event.
For Best Buy Canada, the coming quarters should provide a clearer picture of the performance of its substantially expanded physical network. The Best Buy Express rollout brought the retailer into dozens of additional Canadian communities and contributed to strong comparisons as locations opened.
With those openings now moving further into the comparable sales base, attention shifts to how effectively Best Buy can use its larger Canadian footprint to generate repeat business, connect customers with its digital assortment and services, and sustain growth across the Canadian operation.
