Sales Surge At Best Buy

In the current market, “not as bad as expected” looks like good news.

Best Buy’s (BBY) fourth-quarter earnings fell less than analysts’ estimates, sending the market higher.

But it may be a bear market rally because there are almost certainly more tough times ahead, including poor earnings reports in other sectors and perhaps the failure of some large banks. Employment remains weak, suggesting consumer spending will remain tepid. The US economy contracted at a 6.3% annual rate in the fourth quarter, the weakest performance since 1982, the US Commerce Department reports.

Still, it’s hard to ignore a bit of good news.

Best Buy said sales increased 9.7% to $14.7 billion for the quarter ended February 28. Earnings totaled $570 million, or $1.35 a share. That’s down from $737 million, or $1.71 a share, for the same period a year ago. But excluding restructuring charges, Best Buy earned $1.61 a share, beating analysts’ estimates of $1.40 a share.

Same-store sales fell 2.5% in January and February, not as bad as the 6.8% decline reported in December.

Best Buy said fourth-quarter sales were driven by stronger consumer demand and strong sales of mobile phones, especially in Europe.

The retailer has reduced the pace of new store openings and cut jobs in response to the downbeat economy, as well as Wal-Mart’s (WMT) decision to expand its home electronics offerings and cut prices.

Best Buy should benefit from the closure of Circuit City, formerly the nation’s number 2 electronics retailer. Circuit City filed for bankruptcy protection last year and liquidated its inventory.

The market liked today’s news, but Best Buy isn’t predicting any immediate miracles. For the full year, the company expects same-store sales to be flat to down as much as 5%. It expects to earn $2.50 to $2.90 a share in the current fiscal year, beating estimates of $2.45 a share.

The company plans to open about 65 new stores in 2009.




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