Company Watch: Best Buy: Can You Say Momentum? December 18, 2007 - Best Buy Co. (BBY-NYSE) announced exceptional profits for its fiscal third quarter, up 52% to $228 million, up from $150 million the previous year. Earnings per share were 53 cents, well above the 31 cents of last year. Revenues improved by 17% to $9.9 billion for the quarter with 127 new stores helping the top line, plus the average sales ticket was higher, thanks to big-screen TVs. Same store sales rose 6.7% which included an extra week of after Thanksgiving sales compared to last year. Further breakdown of revenues gives a better picture of how well the company is doing. U.S. only same store sales were up 6.1%. Online revenues jumped by 65%, and international same store sales increased by 9.3%. All the cylinders are firing here. Analysts pegged earnings at 41 cents a share for the quarter and revenues at $9.4 billion. But they were a little off because this holiday season, electronics are the hot ticket, from big screen TV's to PDAs to computers to video games. Maybe the biggest surprise came from the pricing for the large screen sets. While last year there was a price war among retailers, this year the demand has kept up with supply, and prices aren't going down. That's even with new competition from Wal-Mart and other discount stores. ADVERTISEMENT
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With higher revenues, the SG&A (selling, general and administrative costs) went down as a percent of sales, falling from 21.2% to 20%. The company is predicting this year's fiscal year's earnings at $3.10 to $3.20 a share on revenues of $40 billion. Management also raised it estimated new store openings for 2008, going from 130 or 135 to 150. Furthermore, all the old stores will get a face-lift within the next 2 year. When you visit one of the 917 U.S. Best Buy stores, expect to see some changes soon. The remodels will include incorporation of the new Best Buy Mobile division, a unit specializing in cell phones and their attachments. Currently it has 181 in-store mobile phone outlets and 7 stand-alone stores. As for direct competition, Circuit City will report earnings on Friday. It's much smaller and has been struggling of late to turn its operations around. CompUSA was a competitor but recently announced the closing of its 103 stores. For the moment, the momentum seems to all be on Best Buy's side. - Company Web site: www.bestbuy.com - Ted Allrich |
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