Fewer Green Shoots at Best Buy (BBY)

June 16, 2009 by Douglas A. McIntyre

Best Buy LogoBest Buy Co. Inc. (NYSE: BBY) reported earnings which look solid when you compare them to  estimates.  The electronics retail giant posted $0.36 net EPS and $0.42 non-GAAP EPS and $10.095 billion in revenues.  Thomson Reuters had estimates at $0.34 EPS and $10.13 billion in revenues.  Unfortunately, there are issues that many of those hoping for more green shoots might be disappointed with.

Same-store-sales for the last quarter were down at -6.2%.  The company said that the May sales were the most volatile and disappointing because this was on the heels of stimulus checks going out last May.  The company had previously indicated that it anticipates comparable store sales declines to be greater during the fiscal first half of the year than the second half.

The retailer also reaffirmed its $2.50 to $2.90 EPS for the year while estimates are $2.79 EPS.  The company said it is difficult to do more than this right now because so much of the year is back-end loaded and the busy season is still about 4 to 5 months out.

At the mid-point of the range, this gives an implied forward P/E ratio of 13.7.  The company believes it picked up about 200 basis points of market share, although some might say that is a disappointment when considering that Circuit City is now off the market.

Some of the issues to digest are that Best Buy said domestic sales increased while revenue for the domestic consumer electronic industry declined by the low double-digits.  Its market share gains came in March and April.  Unfortunately, it saw lower store traffic and essentially flat average ticket prices.

Best Buy is trading down about 3.9% at $37.15 in pre-market trading.  Its 52-week trading range is $16.42 to $47.50.

Jon C. Ogg
June 16, 2009