Best Buy Tops Estimates

Zacks

Best Buy Company Inc. (BBY) posted fourth-quarter fiscal 2013 earnings of $1.64 per share that came substantially ahead of the Zacks Consensus Estimate of $1.56, but dropped 24.8% year over year.

Including one-time items and discontinued operations, the company reported quarterly loss of $1.21 per share reflecting a significant improvement from a loss of $5.17 per share in the comparable year-ago quarter.

Total revenue for this Zacks Rank #3 (Hold) stock marked a marginal improvement and came in at $16,711 million, ahead the Zacks Consensus Estimate of $16,318 million. Comparable-store sales inched down 0.8% compared with a decline of 1.3% in the prior-year period.

Adjusted gross profit slid 2.3% year over year to $3,782 million during the quarter, whereas adjusted gross margin contracted 60 basis points to 22.6%. Adjusted operating income plunged 22.6% to $924 million, whereas operating margin plummeted 170 basis points to 5.5%.

In a separate development, Best Buy stated that it received no buyout offer from the company’s founder and former chairman, Richard Schulze. Earlier, the company had announced that Mr. Schulze had the choice to propose his offer by Feb 28, 2013.

Segment Details

Domestic segment revenues inched down 0.3% year over year to $12,550 million due to closure of 49 big box stores. However, comparable-store sales increased 0.9% during the quarter. Domestic online sales jumped 11.2% to $1.3 billion.

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.

Robust growth in tablets/eReaders, mobile phone and appliances was witnessed during the quarter. However, this was offset by decline in gaming and digital imaging.

The segment’s adjusted gross profit fell marginally by 0.7% to $2,810 million during the quarter, while gross margin came in at 24.4%, down 10 basis points.  

Best Buy, which competes with Wal-Mart Stores Inc. (WMT) and RadioShack Corp. (RSH), expects Domestic revenues to remain pressured in first-quarter fiscal 2014 on account of Pre-Super Bowl sales shifting to fourth-quarter fiscal 2013.

International segment revenues increased 2% year over year to $4,161 million. However, comparable-store sales dropped 6.6%, reflecting comps decline across China and Canada, partially offset by growth witnessed in Europe.

The International segment’s gross profit dipped 6.9% to $972 million during the quarter, while gross margin shrunk 210 basis points to 23.4%, reflecting unfavorable product mix and increased marketing costs.

Other Financial Details

Best Buy ended the quarter with cash and cash equivalents of $1,826 million, long-term debt of $1,153 million and shareholders’ equity of $3,715 million.

The company paid a quarterly dividend of 17 cents a share, totaling $57 million, on Dec 31, 2012 and generated adjusted free cash flow of $965 million in fiscal 2013. 

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