Best Buy Inc. (BBY) saw sales climb 5% in the fiscal third quarter and raised full year guidance going into the all-important holiday season. BBY is trading with a forward P/E of 13.32.
Company Description
Best Buy is a specialty retailer of technology and entertainment products. It operates retail locations, call centers, web sites and in-home solutions through Best Buy, Audiovisions, Future Shop, Geek Squad, Napster, The Phone House and Speakeasy.
Best Buy Surprised by 23.26% in the Fiscal 2010 Third Quarter
On Dec 15, Best Buy reported fiscal 2010 third quarter results which beat the Zacks Consensus Estimate by 10 cents. It was the third surprise out of the last four quarters. Earnings per share rose 51% to 53 cents from 13 cents in the year ago period. The Zacks Consensus called for 43 cents.
Revenue rose 5% to $12 billion from $11.5 billion in the year ago period. Same store sales rose 1.7%. The revenue increase was boosted by the addition of 127 new stores.
Domestic revenue climbed 9% as same store sales rose 4.6%. The rise in same store sales was attributed to increased traffic and higher spending by customers. Hot items were notebook computers, flat panel televisions, mobile phones and appliances. Gaming, movies and music continued to be weak.
Best Buy also saw strong competitive market gains during the quarter as other competitors, such as Circuit City, are no longer around to lure in customers. The online segment is also showing strength, as sales rose 20% compared to the year ago quarter as website traffic and the average ticket jumped.
The international segment, which is the smaller of the two segments, didn’t fare as well. Revenue fell 6% to $3.1 billion as same store sales fell 6.7%. Negative foreign currency translations also hurt the quarter. Best Buy Europe was included in the same store sales computations for the first time in the quarter. Those sales fell 3%.
Fiscal 2010 Guidance Raised
Best Buy was pleased with the increase in traffic in the third quarter and believed trends provided encouragement for the remainder of fiscal 2010. It raised full year revenue and earnings guidance. It forecast EPS between $3.00 to $3.15 which will be an increase of 4% to 9% over the prior year.
The fiscal 2010 Zacks Consensus followed the earnings guidance higher, jumping 16 cents to $3.09 per share in the last month.
Analysts see growth in fiscal 2011 as the Zacks Consensus climbed 18 cents to $3.32 per share, or 7% over 2009 EPS.
Value Fundamentals
Best Buy is a Zacks #1 Rank (strong buy) stock. It has a price-to-book of 2.80. Best Buy has an outstanding 5-year average return on equity (ROE) of 25.51%. It also rewards shareholders with a dividend yielding 1.40%.
Tracey Ryniec is the Value Stock Strategist for Zacks.com. She is also the Editor in charge of the market-beating Zacks Value Trader service.
