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Best Buy First-Quarter Results Reflect Messy Mobile Gadget Industry
The consumer electronics retailer is seeing a huge countertrend rally off of what were probably low expectations, but it's not likely to last.
Michael Comeau    

This article was originally posted on the Buzz & Banter, where subscribers can follow over 30 professional traders as they share their ideas in real time. Want access to the Buzz plus unlimited market commentary? Click here to learn more about MVPRO+.

Shares of consumer electronics retail giant Best Buy (NYSE:BBY) traded down in early action but reversed higher after the company delivered its first-quarter earnings report.

Here are the important headline facts and figures:

  • EPS came in at $0.33, beating expectations by $0.13.
  • Revenues were $9.04 billion, missing the $9.22 billion consensus.
  • Same-store sales were -1.9% vs. Wall Street's -0.8% forecast.
  • Domestic same-store sales were -1.3%.
  • Domestic online revenue was up 29.2% year-over-year. This is faster than Amazon.com (NASDAQ:AMZN) but comes off a much smaller base.
  • Best Buy said it expects negative low-single-digit SSS for Q2 and Q3.
  • Earnings guidance for Q2 and Q3 is below consensus forecasts.
  • Domestic gross margin fell 70 bps year-over-year due to a less favorable credit card agreement, increased product warranty costs, and other issues.
  • International gross margin fell 80 bps on an increased mix of lower-margin gaming (like the new Microsoft (NASDAQ:MSFT) and Sony (NYSE:SNE) gaming consoles) and computing products, and increased promotional activity in Canada.
In the earnings release, Best Buy's CFO Sharon McCollam said the following:

As we look forward to the second and third quarters, we are expecting to see ongoing industry-wide sales declines in many of the consumer electronics categories in which we compete. We are also expecting ongoing softness in the mobile phone category as consumers eagerly await highly anticipated new product launches.

This makes sense given all the news and data we've seen coming out of the consumer electronics industry as of late:

1. PC, tablet, and smartphone sales are all slumping

2. The digital camera industry is in decline.

3. The TV industry is also in rough shape, with Sony recently warning its sales could fall below forecast. The advent of 4K doesn't look like it has given the industry much of a boost, though Best Buy said it is seeing decent traction.

4. Demand for the new video game consoles and software has been okay, and Best Buy should benefit from the Xbox One price cut. However, that's offset by low margins in the segment and the decline of Nintendo (OTCMKTS:NTDOY) as an industry force.

5. Wearables may have potential, but it's still a tiny market.

So what's next?

The only really big consumer electronics product I see on the horizon is the big-screen iPhone 6, which of course has not even been announced yet. And in any case, given where we are in the smartphone cycle, that would be more of a share taker from Samsung (OTCMKTS:SSNLF) than something that expands the pie.

Best Buy is seeing a huge countertrend rally off of what were probably pretty low expectations, but I doubt it will last.

Twitter: @MichaelComeau

Follow the markets all day every day with a FREE 14 day trial to Buzz & Banter. Over 30 professional traders share their ideas in real-time. Learn more.
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Position in AAPL.
The information on this website solely reflects the analysis of or opinion about the performance of securities and financial markets by the writers whose articles appear on the site. The views expressed by the writers are not necessarily the views of Minyanville Media, Inc. or members of its management. Nothing contained on the website is intended to constitute a recommendation or advice addressed to an individual investor or category of investors to purchase, sell or hold any security, or to take any action with respect to the prospective movement of the securities markets or to solicit the purchase or sale of any security. Any investment decisions must be made by the reader either individually or in consultation with his or her investment professional. Minyanville writers and staff may trade or hold positions in securities that are discussed in articles appearing on the website. Writers of articles are required to disclose whether they have a position in any stock or fund discussed in an article, but are not permitted to disclose the size or direction of the position. Nothing on this website is intended to solicit business of any kind for a writer's business or fund. Minyanville management and staff as well as contributing writers will not respond to emails or other communications requesting investment advice.

Copyright 2011 Minyanville Media, Inc. All Rights Reserved.
Best Buy First-Quarter Results Reflect Messy Mobile Gadget Industry
The consumer electronics retailer is seeing a huge countertrend rally off of what were probably low expectations, but it's not likely to last.
Michael Comeau    

This article was originally posted on the Buzz & Banter, where subscribers can follow over 30 professional traders as they share their ideas in real time. Want access to the Buzz plus unlimited market commentary? Click here to learn more about MVPRO+.

Shares of consumer electronics retail giant Best Buy (NYSE:BBY) traded down in early action but reversed higher after the company delivered its first-quarter earnings report.

Here are the important headline facts and figures:

  • EPS came in at $0.33, beating expectations by $0.13.
  • Revenues were $9.04 billion, missing the $9.22 billion consensus.
  • Same-store sales were -1.9% vs. Wall Street's -0.8% forecast.
  • Domestic same-store sales were -1.3%.
  • Domestic online revenue was up 29.2% year-over-year. This is faster than Amazon.com (NASDAQ:AMZN) but comes off a much smaller base.
  • Best Buy said it expects negative low-single-digit SSS for Q2 and Q3.
  • Earnings guidance for Q2 and Q3 is below consensus forecasts.
  • Domestic gross margin fell 70 bps year-over-year due to a less favorable credit card agreement, increased product warranty costs, and other issues.
  • International gross margin fell 80 bps on an increased mix of lower-margin gaming (like the new Microsoft (NASDAQ:MSFT) and Sony (NYSE:SNE) gaming consoles) and computing products, and increased promotional activity in Canada.
In the earnings release, Best Buy's CFO Sharon McCollam said the following:

As we look forward to the second and third quarters, we are expecting to see ongoing industry-wide sales declines in many of the consumer electronics categories in which we compete. We are also expecting ongoing softness in the mobile phone category as consumers eagerly await highly anticipated new product launches.

This makes sense given all the news and data we've seen coming out of the consumer electronics industry as of late:

1. PC, tablet, and smartphone sales are all slumping

2. The digital camera industry is in decline.

3. The TV industry is also in rough shape, with Sony recently warning its sales could fall below forecast. The advent of 4K doesn't look like it has given the industry much of a boost, though Best Buy said it is seeing decent traction.

4. Demand for the new video game consoles and software has been okay, and Best Buy should benefit from the Xbox One price cut. However, that's offset by low margins in the segment and the decline of Nintendo (OTCMKTS:NTDOY) as an industry force.

5. Wearables may have potential, but it's still a tiny market.

So what's next?

The only really big consumer electronics product I see on the horizon is the big-screen iPhone 6, which of course has not even been announced yet. And in any case, given where we are in the smartphone cycle, that would be more of a share taker from Samsung (OTCMKTS:SSNLF) than something that expands the pie.

Best Buy is seeing a huge countertrend rally off of what were probably pretty low expectations, but I doubt it will last.

Twitter: @MichaelComeau

Follow the markets all day every day with a FREE 14 day trial to Buzz & Banter. Over 30 professional traders share their ideas in real-time. Learn more.
< Previous
  • 1
Next >
Position in AAPL.
The information on this website solely reflects the analysis of or opinion about the performance of securities and financial markets by the writers whose articles appear on the site. The views expressed by the writers are not necessarily the views of Minyanville Media, Inc. or members of its management. Nothing contained on the website is intended to constitute a recommendation or advice addressed to an individual investor or category of investors to purchase, sell or hold any security, or to take any action with respect to the prospective movement of the securities markets or to solicit the purchase or sale of any security. Any investment decisions must be made by the reader either individually or in consultation with his or her investment professional. Minyanville writers and staff may trade or hold positions in securities that are discussed in articles appearing on the website. Writers of articles are required to disclose whether they have a position in any stock or fund discussed in an article, but are not permitted to disclose the size or direction of the position. Nothing on this website is intended to solicit business of any kind for a writer's business or fund. Minyanville management and staff as well as contributing writers will not respond to emails or other communications requesting investment advice.

Copyright 2011 Minyanville Media, Inc. All Rights Reserved.
More From Michael Comeau
Best Buy First-Quarter Results Reflect Messy Mobile Gadget Industry
The consumer electronics retailer is seeing a huge countertrend rally off of what were probably low expectations, but it's not likely to last.
Michael Comeau    

This article was originally posted on the Buzz & Banter, where subscribers can follow over 30 professional traders as they share their ideas in real time. Want access to the Buzz plus unlimited market commentary? Click here to learn more about MVPRO+.

Shares of consumer electronics retail giant Best Buy (NYSE:BBY) traded down in early action but reversed higher after the company delivered its first-quarter earnings report.

Here are the important headline facts and figures:

  • EPS came in at $0.33, beating expectations by $0.13.
  • Revenues were $9.04 billion, missing the $9.22 billion consensus.
  • Same-store sales were -1.9% vs. Wall Street's -0.8% forecast.
  • Domestic same-store sales were -1.3%.
  • Domestic online revenue was up 29.2% year-over-year. This is faster than Amazon.com (NASDAQ:AMZN) but comes off a much smaller base.
  • Best Buy said it expects negative low-single-digit SSS for Q2 and Q3.
  • Earnings guidance for Q2 and Q3 is below consensus forecasts.
  • Domestic gross margin fell 70 bps year-over-year due to a less favorable credit card agreement, increased product warranty costs, and other issues.
  • International gross margin fell 80 bps on an increased mix of lower-margin gaming (like the new Microsoft (NASDAQ:MSFT) and Sony (NYSE:SNE) gaming consoles) and computing products, and increased promotional activity in Canada.
In the earnings release, Best Buy's CFO Sharon McCollam said the following:

As we look forward to the second and third quarters, we are expecting to see ongoing industry-wide sales declines in many of the consumer electronics categories in which we compete. We are also expecting ongoing softness in the mobile phone category as consumers eagerly await highly anticipated new product launches.

This makes sense given all the news and data we've seen coming out of the consumer electronics industry as of late:

1. PC, tablet, and smartphone sales are all slumping

2. The digital camera industry is in decline.

3. The TV industry is also in rough shape, with Sony recently warning its sales could fall below forecast. The advent of 4K doesn't look like it has given the industry much of a boost, though Best Buy said it is seeing decent traction.

4. Demand for the new video game consoles and software has been okay, and Best Buy should benefit from the Xbox One price cut. However, that's offset by low margins in the segment and the decline of Nintendo (OTCMKTS:NTDOY) as an industry force.

5. Wearables may have potential, but it's still a tiny market.

So what's next?

The only really big consumer electronics product I see on the horizon is the big-screen iPhone 6, which of course has not even been announced yet. And in any case, given where we are in the smartphone cycle, that would be more of a share taker from Samsung (OTCMKTS:SSNLF) than something that expands the pie.

Best Buy is seeing a huge countertrend rally off of what were probably pretty low expectations, but I doubt it will last.

Twitter: @MichaelComeau

Follow the markets all day every day with a FREE 14 day trial to Buzz & Banter. Over 30 professional traders share their ideas in real-time. Learn more.
< Previous
  • 1
Next >
Position in AAPL.
The information on this website solely reflects the analysis of or opinion about the performance of securities and financial markets by the writers whose articles appear on the site. The views expressed by the writers are not necessarily the views of Minyanville Media, Inc. or members of its management. Nothing contained on the website is intended to constitute a recommendation or advice addressed to an individual investor or category of investors to purchase, sell or hold any security, or to take any action with respect to the prospective movement of the securities markets or to solicit the purchase or sale of any security. Any investment decisions must be made by the reader either individually or in consultation with his or her investment professional. Minyanville writers and staff may trade or hold positions in securities that are discussed in articles appearing on the website. Writers of articles are required to disclose whether they have a position in any stock or fund discussed in an article, but are not permitted to disclose the size or direction of the position. Nothing on this website is intended to solicit business of any kind for a writer's business or fund. Minyanville management and staff as well as contributing writers will not respond to emails or other communications requesting investment advice.

Copyright 2011 Minyanville Media, Inc. All Rights Reserved.
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