Best Buy Gets Discounted
But market reaction is oversold, overdone.
In the period ended August 30th, the Minnesota-based company reported a bottom line profit of $202 million, or $0.48 per share - bad news, since it was markedly lower than the $250 million or $0.55 share it earned in the same period last year. And the news gets even worse: The number was also a hefty $0.09 shy of what analysts had been looking for.
The reason: A rising SG&A line. In fact, as a percentage of sales, SG&A came in at 20.8% in the most recent quarter, versus 19.9% in the comparable period last year. According to the earnings release, "Increases in store labor to support the Best Buy Mobile operating model and planned investments in customer-facing labor generated most of the SG&A rate increase."
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To give you a sense of how things are at competitor Circuit City (CC), for example: In its latest quarter, its gross margin came in at 20.8%, which was 170 basis points below what it turned in during the comparable period the year before.
Another thing that caught my eye was its comp-store-sales numbers, which were up 4.2% in the period - and it was going up against a respectable comparison. A gander at last year's second-quarter release reveals that Best Buy posted a comp-store gain of 3.6% at that time.
Its revenue number also came in at roughly $9.8 billion, ahead of analysts' expectations, which put the number at $9.67 billion.
Finally, in conjunction with its second-quarter numbers, the company said that it's looking for earnings of between $3.25 and $3.40 a share for the year. That's good news for 2 reasons: First, the Street is currently looking for $3.28 a share - so it's essentially in line with expectations. Second, it seems consistent with guidance it offered up back in June in conjunction with its first-quarter results.
In sum, while its EPS number wasn't all that great, the revenue number and comps do, I think, deserve attention. To me, the reaction was a bit overdone.
Best Buy closed at $42.40, down $1.30 or 2.97%.
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