Best Buy Company, Inc. (BBY) recently reported better-than-expected fourth-quarter 2010 results, sending shares up $3.17 or 7.7% to $44.35 in early hours trading.
The quarterly earnings of $1.82 per share surpassed the Zacks Consensus Estimate of $1.79 and rose 13% from $1.61 delivered in the prior-year quarter, buoyed by sustained growth in the top-line and disciplined cost management.
Even in this sluggish economic environment, plagued by heavy job losses and lower discretionary spending, Best Buy was able to increase its market share. The company’s domestic market share rose 2.6% in the quarter. The company has been particularly able to increase its market share since the liquidation of its archrival Circuit City.
Notebook computers, mobile phones, digital imaging and flat-panel TVs were the strongest categories. These were offset by softness in music and movies.
The Richfield, Minnesota-based company said that total revenue climbed 12.4% year-over-year to $16,553 million reflecting the net addition of stores in the last 12 months, a 7% increase in comparable-store sales and favorable impact of foreign currency translation. Comps in the prior-year quarter had declined 4.9%.
Domestic revenue climbed 11.5% to $12,584 million reflecting the net addition of new stores in the last 12 months and a 7.4% gain in comparable-store sales. Comps in the prior-year quarter had declined 4.8%.
International revenue soared 15.5% to $3,969 million, driven by the net addition of new stores in the last 12 months, a 5.5% gain in comparable-store sales and favorable impact of foreign currency translation. Comps in the prior-year quarter had fallen by 5.3%. Excluding foreign currency translation, international revenue grew 5%.
Best Buy Europe posted a 4% increase in comparable-store sales. China reported a 34% gain in comparable-store sales, whereas Canada experienced flat comparable-store sales.
Total gross margin contracted by 60 basis points (bps) to 24%. Domestic gross margin narrowed by 95 bps to 23.6% due to sales of lower-priced products such as notebook computers. International gross margin expanded 60 bps to 25.4%.
The increase in market share, growth in revenue, along with signs of improvement in traffic count, makes management optimistic about fiscal 2011.
The nation’s largest electronics retailer, Best Buy now expects earnings in the range of $3.45 to $3.60 per share for fiscal year 2011, reflecting an increase of 10% to 14% year-over-year. The guidance came ahead of the current Zacks Consensus Estimate of $3.36. Revenue in fiscal 2011 is expected between $52 billion to $53 billion, an increase of 5% to 7%. Comparable-store sales are expected to rise in the range of 1% to 3%.
Best Buy ended fiscal year 2010 with cash and cash equivalents of $1.8 billion. Operating cash flow for the year soared 18% to $2.2 billion, whereas capital expenditure dropped 53% to $615 million.
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