Best Buy Reports Above Expectations

Zacks

Best Buy Company Inc.’s (BBY) holiday sales numbers came in as a surprise, as the company’s results exhibited signs of improvement.

Total revenue for the beleaguered consumer electronics retailer came in at $12.8 billion for the 9 weeks period ended Jan 5, 2013, waning marginally from $12.9 billion for the 9 weeks period ended Dec 31, 2011. Comparable-store sales inched down 1.4% during the period.

Segment wise, net sales inched down 1.2% to $9.9 billion for the Domestic segment, while comparable-store sales remained flat. The company’s strategic initiatives, including its price match policy, multi channel strategy, lucrative assortments and employee training facilitated the company to come up with better-than-expected results.

Best Buy stated that appliances, mobile phones and tablets/eReaders registered positive comparable-store sales growth, while televisions, entertainment and computing marked a sales decline during the period. Domestic segment’s online channel revenue jumped 10% to $1.1 billion, reflecting strong traffic.

Sturdy online sales performance remains a positive for the company as heightened competition from online retailers like Amazon.com Inc. (AMZN), was adversely affecting its sales and profitability.

Moreover, Best Buy has long been struggling with dwindling sales in key categories including televisions, notebooks, digital imaging and gaming devices, which in turn, is taking a toll on the company’s same store sales results.

Sales at the company’s International segment increased 2.2% year over year to $2.9 billion. However, comparable-store sales declined 6.4%, reflecting sales decline in Canada and China.

Currently, we have a long-term ‘Underperform’ recommendation on the stock. Moreover, Best Buy, which faces competition from Wal-Mart Stores Inc. (WMT), holds a Zacks Rank #5 (Strong Sell).

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