Best Buy Warns Tariffs Could Raise Prices, Stock Drops 15%

Best Buy warned that newly implemented tariffs could lead to higher prices for American consumers, causing its stock to fall by 15% on Tuesday—its worst single-day decline in nearly five years.

The 25% tariffs on imports from Mexico and Canada went into effect the same day, while duties on Chinese goods were raised to 20%. Best Buy executives noted that China remains its primary source of products, followed by Mexico. “The giant wildcard obviously is how 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 some signs of weakness at the moment,” said Matt Bilunas, CFO, during a call with analysts.

The warning comes as US consumer spending declined for the first time in nearly two years, with retail sales seeing their sharpest drop in that same period. Categories like furniture, clothing, and electronics were particularly affected.

Uncertainty over tariffs overshadowed a stronger-than-expected holiday quarter for Best Buy. The company posted a 0.5% increase in fourth-quarter comparable sales, breaking a streak of 12 consecutive quarters of declines. Analysts had expected a 1.33% drop. Best Buy reported adjusted earnings of US$2.58 per share, surpassing analysts’ expectations of US$2.40. However, its fiscal 2026 guidance for comparable sales growth, ranging from flat to up 2%, fell short of analysts’ 1.71% forecast. The outlook does not account for the impact of the new tariffs.

Other major US retailers have also expressed caution about the tariff impact. Target and Walmart have provided conservative forecasts, citing uncertainty over supply chain costs. Brian Cornell, CEO, Target noted that prices for seasonal produce, such as avocados, could increase in the coming days due to reliance on Mexican imports. “If there is a 25% tariff, those prices will go up...certainly over the next week,” Cornell said in an interview with CNBC.

Best Buy shares were trading at US$73.50 on Tuesday, marking the largest percentage decline on the S&P 500 index. J.P. Morgan analysts noted in a report that the escalating trade conflict remains a significant risk for retailers.