Rabu, 19 Desember 2007

Best Buy Smashes Analysts' Q3 Views, But This Quarter's Outlook Not So Hot (Investor's Business Daily)

Flat-panel TVs, notebook computers and video game consoles are hot items this holiday season. And apparently, Best Buy stores are where consumers want to buy them.

The Richfield, Minn.-based electronics retailer posted third-quarter results Tuesday that smashed Wall Streets forecasts. For the quarter ended Dec. 1, Best Buy (NYSE:BBY - News) earned 53 cents a share, a 71% jump from a year ago, on sales of $9.93 billion, up 17%.

Analysts polled by Thomson Financial had expected Best Buy to earn 41 cents a share on sales of $9.44 billion.

Best Buys performance stands in stark contrast to much of the retail landscape, which is seeing the weakest holiday season since 2002. Rising fuel prices, the credit crunch and a drop in home values have made shoppers more cautious this season. Apparel retailers have been especially hard hit.

Outlook Disappoints

Still, some investors were disappointed in the retailers guidance for the current quarter, said Vivian Ma, an analyst with CIBC World Markets.

Best Buy expects fourth-quarter EPS of $1.70 to $1.80, which falls short of analyst views of $1.82. It sees about $13.4 billion in sales, which is $275 million less than analysts expected.

Best Buy shares slipped for much of the day, but closed up 1%.

Brian Dunn, Best Buys president and chief operating officer, credited the companys "customer centricity" efforts for its strong performance last quarter. Best Buys growth comes from its "continued progress in building relationships with customers," Dunn said in a conference call.

Best Buy has worked to improve the customer experience, especially for big spenders, in its stores. Its offering more services such as its Geek Squad computer repair and Magnolia home theater installation. Plus, its Reward Zone loyalty program has attracted nearly 28 million members.

Best Buy is listening to its customers more on what products its stores should sell, Dunn says. In response to customer requests, it added Dell (NasdaqGS:DELL - News) computers to round out its PC offerings

It has been experimenting with new product categories such as musical instruments, too.

"We see a ton of untapped opportunities for growth next year and for the next 10 years," Dunn said. "We are striving to build relationships by offering more for our customers."

Dunn says Best Buy is exploring new opportunities in its financial services, warranties, cellular, private-label goods and high-end electronics businesses.

Best Buy is gaining market share from other electronics retailers, says Morningstar analyst Brady Lemos.

"A lot of its competitors are struggling. CompUSA is closing all of its stores. Tweeter closed a bunch of stores," he said. Circuit City Stores (NYSE:CC - News) also is ailing.

But warehouse clubs such as Costco (NasdaqGS:COST - News) and Wal-Marts (NYSE:WMT - News) Sams Club are pressuring Best Buy in high-definition TVs and other product categories -- and gaining share, says Ma of CIBC.

Best Buy is benefiting from strong sales of flat-panel TVs, video game consoles, notebook PCs and GPS navigation devices. But growth in some of those categories is starting to slow, and there doesnt seem to be any big new categories on the horizon, Ma says.

Expansion Plans

Best Buy got a revenue boost from the net addition of 127 new stores in the past 12 months and a same-store sales gain of 6.7% in the third quarter.

The retail chain says it expects to open about 150 new stores worldwide during fiscal 2008, up from the previous estimate of 130 to 135 stores.

The company finished the third quarter with its cellular mini-stores, branded Best Buy Mobile, in 181 U.S. Best Buy stores. There are also seven stand-alone locations.

After seeing early positive top-line results and a healthy outlook for its U.S. mobile business, the company decided to remodel all of its U.S. Best Buy stores in the next two years to include Best Buy Mobile.

The company has more than 900 Best Buy stores in the U.S.

 
eXTReMe Tracker