Best Buy Co, Inc. (NYSE: BBY)
Amidst the Red Sea that is the stock market these days, it is nice to see that there is a company out there that is still beating earnings expectations. The surprising part of this particular story is that the earnings beat is coming from a largely bricks-and-mortar consumer electronic retailer. Although you could argue that Wall Street set the expectation bar very low, Best Buy still delivered a healthy earnings beat.
BBY Earnings Report
The official earnings number for Best Buy in the second quarter was $164 million or 49 cents per share. Compare that to $146 million and 41 cents per share in the same quarter last year, and you can see why investors are optimistic. Compare the 49 cents per share to the Thomson Reuters estimatesof 34 cents per share, and you can see why investors are surprised! Revenue also came in above expectations. $8.3 billion was expected and $8.5 billion is what was revealed in the earnings statement. Much of the success is thought to be as a result of Best Buy’s investment into its online store. Many feared that Best Buy had become a great place for consumers to physically see and test electronics for free before going online to find the best deal. A 17% increase in e-commerce sales seem to hint that Best Buy has found a way to capture some of those online purchases for itself. In an industry that has seen plenty of extinctions recently from CompUSA and Circuit City to Radioshack, Best Buy has done a remarkable job of staying profitable with such a large physical retail presence. They are seemingly the last man standing in a consumer electronics retail sector that has been driven into the ground by online retailers like Amazon or huge competitors like Walmart.
Best Buy Betting on Apple
Other than Apple itself, Best Buy is the only authorized retailer of the Apple Watch in the US. That is a pretty nice piece of the market to have cornered with one of the most popular electronics brands in the world. Best Buy started selling the Apple Watch on August 7th at a limited number of stores with a plan to sell the watch at 300 of its stores during the holiday season. By their earnings announcement on August 25th, Best Buy CEO Hubert Joly said he wants to be selling the Apple Watch in all 1,050 of their stores by the end of September! He said demand for the Apple Watch has been “so high” that he is ramping up efforts and betting big on it. Best Buy is also updating and expanding the Apple sections or “shop-in-shops” at 740 of its locations, beginning to sell AppleCare services, and experimenting with becoming an authorized service provider. Essentially becoming the local Apple store for communities that do not have a full Apple store could prove to be a very lucrative move for Best Buy if executed right.
Analyst Opinions
At the end of another tough day in the market, Best Buy still closed up 12.61% on the day. Analysts are fairly bullish on BBY’s prospects at the moment as well. The stock has four hold ratings, seventeen buy ratings, and one strong buy rating. The average price target for the stock is $41.48, over 25% higher than where it closed the day on Tuesday.
Company Profile
Best Buy Co., Inc. is a consumer electronics retailer with 1,050 stores spread across the US, Canada, and Mexico. The company sells computers, tablets, cell phones, TVs, cameras, video games, movies, and home appliances among other products. They also offer services like tech support through Geek Squad and video streaming through CinemaNow. The company is headquartered in Richfield, Minnesota.
