On January 15th, Best Buy (NYSE: BBY) announced earnings from the “Holiday period,” referring to the nine weeks ending on January 3rd. Highlights from the report include a 2.1% year-over-year increase in revenue and a 2.6% year-over-year increase in domestic comparable sales. This report excludes revenue derived from Best Buy’s Five Star business in China.
Best Buy president and CEO, Hubert Joly, commented, “A compelling merchandise assortment, strong multi-channel execution, and a more favorable year-over-year macroeconomic environment drove these better-than-expected results. We were also able to capitalize on the product cycles in large screen televisions and mobile phones. These two categories were the primary drivers of our year-over-year revenue growth, more than offsetting significant weakness in tablets.”
Despite technical issues plaguing Best Buy’s website on Black Friday and over the weekend, online sales grew 13.4% to $1.49 billion. Best Buy attributed the increase to “(1) substantially improved inventory availability made possible by the chain-wide rollout of our ship-from-store capability in January 2014; (2) higher conversion rates; and (3) increased traffic driven by greater investment in online digital marketing,” according to a press release.
In light of the holiday sales, Best Buy updated their fourth quarter outlook. Sharon McCollam, CFO, noted, “Enterprise comparable sales growth, excluding the impact of installment billing, near 1% versus our previous outlook of near flat” and “non-GAAP operating income rate expansion of 75 to 90 basis points versus our previous outlook of 50 basis points.”
On January 15th, analyst Denise Chai of Bank of America Merrill Lynch maintained a Buy rating on Best Buy and lowered her price target from $48 to $45. Chai noted that the mediocre Q4 guidance precipitated the price drop. Chai wrote, “Management is calling for 1H15 EBIT to decline 30-50bps and while this does include pressure from new investments… we believe it also reflects deleverage on guidance for flat to negative comps.” The analyst continued, “However, we believe this is too conservative given continued benefits from TV, gaming, and appliance cycles. We note BBY had guided to LSD comp decline in 3Q/4Q but reported 3Q comp of +2.2 percent and holiday comp of +2.5 percent.”
Denise Chai has a 61% overall success rate recommending stocks with a +6.1% average return per recommendation.
Separately on January 13th, analyst Matthew J Fassler of Goldman Sachs upgraded Best Buy from Netural to Buy with a $45 price target before the company released holiday earnings. Fassler is optimistic about the future of TV sales, noting “With solid sector fundamentals, including a surge in advanced TV sales, we are positioned above consensus for the next three quarters.” He continued, “Beyond tactical considerations, we note BBY’s positioning as the sole surviving national specialty retailer in a category with increased product excitement; BBY’s better online sales growth; and, the reality that its pricing is increasingly at parity with Amazon, especially in TVs.”
Matthew J Fassler has a 51% overall success rate recommending stocks with a +5.3% average return per recommendation.
On average, the top analyst consensus for Best Buy on TipRanks is Moderate Buy.