An electronic device may be provided with a display mounted in a housing. The display may include a liquid crystal display module and a reflective polarizer having an in-plane optical axis. The display may also include a backlight unit that includes a light source, a light guide element, and a reflector film coupled to a backside of the light guide element. The display may also include a light retardation layer such as a quarter wave film. The quarter wave film may be arranged between the reflective polarizer and the reflector film of the backlight unit. Partially polarized light that is output from a front side of the light guide element may have a first component parallel to the in-plane optical axis and a second component perpendicular to the in-plane optical axis of the reflective polarizer. The second component may be reflected from the reflective polarizer.