Best Buy Company Inc. (BBY), the leading specialty retailer of consumer electronic products, recently posted weaker-than-expected second-quarter 2012 results. The quarterly earnings of 47 cents a share missed the Zacks Consensus Estimate of 53 cents and plunged 21.7% from 60 cents earned in the prior-year quarter.
The Zacks Consensus Estimate inched down a penny prior to the earnings release with 6 of the 19 analysts covering the stock revising their estimates downwards over the last 7 days.
Management updated its fiscal 2012 adjusted earnings guidance range to $3.35 to $3.65 (including a positive impact of 20 cents to 25 cents a share from a share repurchases) from its earlier guidance range of $3.30 to $3.55 per share.
Gross profit came down 2% to $2,872 million, whereas gross margin contracted 40 basis points (bps) to 25.3%. Operating income slipped 30% to $287 million, whereas operating margin shriveled 110 bps to 2.5%.
Richfield, Minnesota-based Best Buy, said that total revenue remained almost flat at $11,347 million from the prior-year quarter. However, the company registered a fall of 2.8% in comparable-store sales versus a marginal decrease of 0.1% witnessed in the year-ago quarter.
The total revenue also came below of the Zacks Consensus Estimate of $11,442 million. For fiscal 2012, Best Buy stood by its earlier projection and expects revenue between $51 billion to $52.5 billion.
Domestic segment revenue dropped 1.5% to $8,311 million due to a 2.7% fall in comparable-store sales. Comps in the prior-year quarter had decreased 1.4%. Domestic gross profit dipped 3% during the quarter while gross margin came in at 25.3%.
The Domestic segment experienced comparable-store sales growth across mobile phones, mobile computing (including tablets), eReaders, appliances and services. These were offset by fall witnessed across television, digital imaging, and physical media. However, Domestic online revenue jumped 13%.
International revenue increased 4.6% to $3,036 million, however comparable-store sales decreased 3.2% compared with an increase of 4.3% in the prior-year quarter. Five Star business in China posted healthy comparable store sales growth, whereas Europe and Canada witnessed fall in comparable-store sales. International gross profit increased 4% during the quarter while gross margin came in at 25.4%.
Best Buy ended the quarter with cash and cash equivalents of $2,040 million, total long-term debt of $1,696 million, and shareholders’ equity of $6,810 million. During the quarter under review, the company bought back approximately 12.7 million shares at a price of $28.31 per share, aggregating $358 million. Year-to-date, the company repurchased 29.2 million shares at an average price of $29.51 per share, aggregating $863 million.
Moreover, the company also paid a quarterly dividend of 15 cents per share, aggregating $56 million.
Currently, we have a long-term Neutral rating on the stock. However, Best Buy, which faces competition from Wal-Mart Stores Inc. (WMT), holds a Zacks #4 Rank that translates into a short-term Sell rating.
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