Photo Credit: Mike Mozart

Best Buy Co., Inc. (BBY) Consumer Discretionary – Specialty Retail | Reports May 24, Before Market Opens

Key Takeaways

Consumer electronics retailer, Best Buy, is scheduled to announce first quarter earnings Tuesday morning. Best Buy’s business has been significantly impacted lately by the emergence of online retailers like Amazon (AMZN). To remain competitive, the company has enhanced its online business but that has been unable to carry weak earnings. In its Q4 analyst call, Best Buy gave guidance that Q1 revenue could decline between 2.4% and 3.6% with double digit declines coming in international sales. Domestic comparable store sales could also fall as much as 2%.

Early indications do not look promising for Best Buy ahead of its earnings. The Estimize consensus is calling for earnings of 36 cents per share on $8.30 billion in revenue, 1 cent higher than Wall Street on the bottom line and right in line on the top. This reflects a 5% drop in earnings and 4% decline in sales from a year earlier. It’s not surprising that shares are down 11.3% given Best Buy’s consistently weak earnings. Fortunately for shareholders, the stock typically increases 4% in the 30 days following results. 

Best Buy’s biggest problem lately has been the ongoing transition towards its online services. Last quarter and year featured nearly 14% gains in comparable online sales while brick and mortar continue to suffer. Best Buy’s move earlier this year to offer same day delivery in major market should bode well for online sales. Currently online sales account for 11% of domestic revenue and as its new initiatives take off, this number should increase