Best Buy Company, Inc. (BBY), a leading specialty retailer of consumer electronic products, recently posted better-than-expected first-quarter 2012 results, thereby sending the shares up $2.06 or 7.2% to $30.88 in pre-market trading.
The quarterly earnings of 35 cents a share topped the Zacks Consensus Estimate of 33 cents, but fell 2.8% from 36 cents earned in the prior-year quarter. The Zacks Consensus Estimate had remained stagnant prior to the earnings release with none of the 25 analysts covering the stock revising their estimates in the last 30 or 7 days.
Management reiterated its fiscal 2012 adjusted earnings guidance range of $3.30 to $3.55 per share. The current Zacks Consensus Estimate for the fiscal year is $3.46.
Gross profit dropped marginally by 0.9% to $2,768 million, whereas gross margin contracted 60 basis points (bps) to 25.3%. Operating income slipped 9.9% to $282 million, whereas operating margin fell 30 bps to 2.6%.
Richfield, Minnesota-based Best Buy said that total revenue climbed 1.4% to $10,940 million from the prior-year quarter. However, the company registered a fall of 1.7% in comparable-store sales versus growth of 2.8% in the year-ago quarter.
The total revenue also came ahead of the Zacks Consensus Estimate of $10,697 million. For fiscal 2012, Best Buy projected revenue between $51 billion and $52.5 billion.
Domestic segment revenue dropped 0.8% to $7,859 million due to a 2.4% fall in comparable-store sales. Comps in the prior-year quarter had increased 1.9%. Domestic gross margin contracted 60 bps to 25.1%.
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 12%.
International revenue jumped 7.6% to $3,081 million, whereas comparable-store sales grew marginally by 0.4% compared with an increase of 6.3% in the prior-year quarter. The Five Star business in China posted healthy comparable store sales growth, whereas Europe and Canada witnessed fall in comparable-store sales. International gross margin shriveled 40 bps to 25.9%.
Best Buy ended the quarter with cash and cash equivalents of $2,208 million, total long-term debt of $2,141 million, and shareholders’ equity of $7,053 million. During the quarter under review, the company bought back approximately 16.6 million shares at a price of $30.43 per share, aggregating $505 million. The company still has $800 million at its disposal under its share repurchase authorization.
Currently, we have a long-term Neutral rating on the stock. Moreover, Best Buy, which faces competition from Wal-Mart Stores Inc. (WMT), holds a Zacks #3 Rank that translates into a short-term Hold rating, and correlates with our long-term recommendation.
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