Best Buy Results Beat Estimates
Best Buy Co., the largest consumer electronics retailer in the US, posted better-than-expected earnings results for the 4th quarter today:
Shares of Best Buy Co. (BBY) had their biggest gain this year, after investors cheered a rosier-than-expected forecast and a smaller-than-expected 23% decline in fourth-quarter profit.
The nation’s largest electronics retailer said sales exceeded its expectations and improved in January and February following a dismal holiday season, and that it benefited from the bankruptcy of its smaller rival Circuit City, which went into liquidation. Best Buy, which reported its market share increased by about 1.2 percentage points to 22% as of Jan. 31, also said it has further share upside.
Circuit City’s bankruptcy and subsequent liquidation will help drive earnings at Best Buy for years to come, as the company has the potential to grab large swaths of market share from its now-defunct competitor. It’s stock has come under pressure in the last year, though, falling by 67% from its 52-week high set in October 2008, but it has recovered substantially in the last few months. In today’s trading session, Best Buy’s shares are up over 12% to around $38, following the positive earnings announcement and bullish forecast. The shares are up 34% so far this year:
Despite the downturn in consumer spending in the 4th quarter, Best Buy was still able to produce for their shareholders. The good news is that they only expect for things to get better, as the economy recovers and discretionary spending picks up once more. It’s nice to see Best Buy, a consumer giant in an extremely cyclical industry, perform above expectations. As the poorly-run companies fail in hard times, well-managed industry stalwarts survive and even thrive in these harsh conditions, coming out stronger in the end.
Fourth-quarter net income fell to $570 million, or $1.35 a share, from $737 million or $1.71 a share in the year-earlier period.
Revenue in the quarter, which ended Feb. 28, rose 10% to $14.7 billion from $13.4 billion. That jump reflected the addition of 213 stores the past year and the inclusion of Best Buy Europe, following a partnership with London’s Carphone Warehouse to expand Best Buy’s mobile business in the region.
Excluding costs for voluntary departures and job cuts at its Minneapolis headquarters and elsewhere, Best Buy said it would have earned $1.61 a share. Analysts expected the company to earn $1.40 a share, according to a survey by FactSet Research.
The company said it expects to post $2.50 to $2.90 a share for fiscal 2010. Analysts have forecast a profit of $2.45 a share, according to FactSet.