Best Buy’s Weak Results… When Bad News Looks Good (BBY, RSH, HGG, CONN, WMT, AMZN)
September 13, 2011 by Jon C. Ogg
If you can’t dazzle them with your brilliance, then try baffling them with your footwork. That appears to be how Best Buy Co., Inc. (NYSE: BBY) is selling its weak second quarter earnings this morning.
The company reported diluted EPS of $0.47, compared with $0.60 in the same period a year ago and a consensus analysts’ estimate of $0.53. Revenue totaled $11.35 billion in the quarter, essentially flat with a year ago, and lower than the estimate of $11.52. This is a pretty woeful showing for a retailer that competes directly with such smaller companies as RadioShack Corp. (NYSE: RSH), hhgregg, Inc. (NYSE: HGG), and Conns Inc. (NASDAQ: CONN).
Those much smaller companies aren’t Best Buy’s biggest problem. That comes from the massive players it really competes with: Wal-Mart Stores Inc. (NYSE: WMT), Amazon.com (NASDAQ: AMZN), among others. Best Buy said that sales of tablets, eReaders, and appliances rose but that sales of televisions, game controllers, digital media devices, and physical media (blank CDs and DVDs) were lower and offset other gains.
Perhaps worse, the company’s sales of mobile phones fell -5%, but it wasn’t Best Buy’s fault. The company said the decline was “due to industry softness driven by the lack of significant new phone launches during the quarter” when compared to same period a year ago. The facts notwithstanding, Best Buy said that it “believes that it continued to grow share in mobile phones in the second quarter.” Whatever.
In order to get investors to believe that line, the company touted its buyback of $358 million worth of its stock during the quarter, bringing its total buyback for the year to $863 million. Best Buy expects to buy back $1.5 billion of its stock in the 2012 fiscal year, which the company says adds $0.20-$0.25 of “annual EPS benefit.”
Then in a fit of honesty, Best Buy notes that if you back out the buyback benefit, the company’s EPS range is $3.30-$3.55, unchanged since its original FY2012 forecast in March. Analysts were expecting full-year EPS of $3.48.
From a high of around $32/share in mid-June, Best Buy shares have fallen by about -25%. That’s the primary reason the stock is getting a little pre-market boost this morning — the results weren’t terrible and there’s plenty of room for the stock to go up. Of course with the bar set very low, lukewarm results don’t look so bad.
Best Buy’s shares are up about 0.75%, at $25.15, at 40 minutes before the market opens this morning. That tiny bump is not likely to last.
Paul Ausick
Essential Tips for Investing: Sponsored
A financial advisor can help you understand the advantages and disadvantages of investment properties. Finding a qualified financial advisor doesn’t have to be hard. SmartAsset’s free tool matches you with up to three financial advisors who serve your area, and you can interview your advisor matches at no cost to decide which one is right for you. If you’re ready to find an advisor who can help you achieve your financial goals, get started now.
Investing in real estate can diversify your portfolio. But expanding your horizons may add additional costs. If you’re an investor looking to minimize expenses, consider checking out online brokerages. They often offer low investment fees, helping you maximize your profit.