The news: Best Buy beat Wall Street analysts’ expectations in Q2, but continues to face a challenging environment in which few consumers are splurging on big-ticket items such as home theaters, TVs, and appliances.

• Adjusted earnings per share were $1.22, down 20.8% from $1.54, but ahead of the $1.06 that analysts expected, per Refinitiv.
• Revenues were $9.58 billion, down $10.33 billion, but ahead of the $9.52 billion that analysts expected.

A challenging space: “We continue to expect that this year will be the low point in tech demand after two years of sales declines,” said CEO Corie Barry, in a statement.

• That comment is in line with our forecasts. While we expect overall retail sales to grow 2.9% this year, we project computer and consumer electronics sales to rise just 1.1%.
• In recognition of its near-term challenges, Best Buy narrowed its revenue guidance to $43.8 billion to $44.5 billion from $43.8 billion to $45.2 billion. It also adjusted its comparable sales guidance to a decline of 4.5% to 6.0% from its previous decline of 3.0% to 6.0%
• It also continues to look for ways to drive growth. For example, its recently launched membership program, My Best Buy Total, helped it generate a slightly better gross profit rate in the quarter. That trend line drove it to slightly raise its expected adjusted earnings per share range to $6 to $6.40 up from its prior guidance of $5.70 to $6.50.

The bottom line: Given the slow-growth environment, Best Buy needs to protect its bottom line by executing well on fundamentals such as inventory management and upselling consumers on its membership programs.

• However, over the long term it needs to find ways to improve the experience it delivers to shoppers to avoid losing sales to mass merchants like Amazon, Walmart, and Costco.