Best Buy Co., Inc. BBY appears to be a consistent performer, thanks to its outstanding digital endeavors and “Building the New Blue” initiative. The company’s quick shift to a contactless curbside service-only operating model amid the coronavirus crisis has worked wonders.
The consumer-electronics retailer is also progressing well with Total Tech Support program and healthcare technology business. Impressively, the Richfield, MN-based company’s shares have registered an increase of 21.8% over the course of a year, while its industry gained only 0.2%. A VGM Score of A further adds to strength. Let’s delve deeper.
Despite store closures, Best Buy’s curbside operating model has helped it retain nearly 80% of last year’s sales over the last six weeks of first-quarter fiscal 2021. The customer satisfaction scores for curbside pickup have been contributing to the company’s domestic online growth.
Management has been boosting shoppers’ experiences through physical shopping with curbside pickup and in-store consultation process. At its first-quarter earnings released on May 21, the retailer said that nearly 70% of its stores are operating in this format. It is also focused on improving its buy online, pickup-in-store services.
Best Buy’s Building the New Blue initiative, which focuses on pursuing growth opportunities, better execution in key areas, cost containment and investing in people and systems, is driving performance. Moreover, it is making a significant headway into the healthcare technology business by undertaking strategic buyouts in the space.
Recently, the company entered into a partnership with Validic, an industry-leading technology platform. Validic collects data from connected devices, processes it, and then offers meaningful insights. This partnership will aid the company in bringing innovative monitoring solutions to efficiently control chronic health conditions in the home. It acquired GreatCall and Critical Signal Technologies that provides personal emergency response systems and tele-health monitoring services.
While the aforesaid factors instill optimism, higher cost of investments toward technology is undoubtedly putting pressure on Best Buy’s margins. During the first quarter of fiscal 2021, higher supply chain costs on increased mix of online revenues coupled with lower mix of high-margin service revenues hurt margins.
Nonetheless, we expect the margin woes to heal in future, given the company’s tech-agnostic efforts and other well-defined initiatives. Additionally, Best Buy boasts a robust positive earnings surprise trend, marking 10th straight quarter of earnings beat in first-quarter fiscal 2021. It has recorded a trailing four-quarter positive earnings surprise of 21.6% on average.
Also, the company’s top line surpassed the Zacks Consensus Estimate for the third successive time. The Zacks Consensus Estimate of $5.03 for current fiscal year’s earnings shows an increase of 0.8% in the past 30 days. It also has an expected long-term earnings growth rate of 7%. The company currently displays a Zacks Rank of #3 (Hold).
Key Picks in Retail
Sprouts Farmers Market SFM has a trailing four-quarter positive earnings surprise of 37.2% and a Zacks Rank #1 (Strong Buy). You can seethe complete list of today’s Zacks #1 Rank stocks here.
SpartanNash SPTN, also a Zacks Rank #1 stock, has a positive earnings surprise of 76.3% for the last reported quarter.
Dollar General DG has a long-term earnings growth rate of 12.4%. Currently, it carries a Zacks Rank #1.
Zacks’ Single Best Pick to Double
From thousands of stocks, 5 Zacks experts each picked their favorite to gain +100% or more in months to come. From those 5, Zacks Director of Research, Sheraz Mian hand-picks one to have the most explosive upside of all.
This young company’s gigantic growth was hidden by low-volume trading, then cut short by the coronavirus. But its digital products stand out in a region where the internet economy has tripled since 2015 and looks to triple again by 2025.
Its stock price is already starting to resume its upward arc. The sky’s the limit! And the earlier you get in, the greater your potential gain.
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