Best Buy (BBY) Soars on Earnings
Shares of Best Buy Co. (BBY) closed up +4.07 or +13.24 percent to $34.80 per share on Tuesday, after the company reported better than expected second quarter earnings. The company's improved earnings and profitability in the second quarter was largely due to cost cutting measures that included store closings and layoffs. The turnaround program, dubbed "Renew Blue," was initiated by Chief Executive Officer Hubert Joly, who was hired one year ago as the company struggled to compete with online retailers, as well as traditional rivals, Target (TGT) and Wal-Mart (WMT). Daily Chart
Founded in 1966 as an audio specialty store, Richfield, Minnesota based Best Buy Co. renamed in 1983 concentrating more on consumer electronics.
The company operates over 1,100 stores, a well as more than 100 Best Buy Express automated retail stores operated by Zoom Systems in malls and airports. Second quarter earnings results surprised many analysts, coming in at $266 million or $0.77 per share, versus $12 million or $0.04 per share in the same period one year ago. Earnings excluding some items came to $0.32 per share, versus $0.26 per share in last year's second quarter. Revenue came in slightly lower, at $9.3 billion, versus $9.34 billion in 2012's second quarter. Analysts predicted Best Buy would earn $38 million or $0.12 per share on revenue of $9.13 billion. Best Buy stock rose to a new yearly high of 34.82 in Tuesday's session, more than triple what the company was trading for earlier this year. The better than expected earnings were in large part a result of the company's "Renew Blue" turnaround program, started by CEO Hubert Joly. The plan, which called for a goal of cutting $725 million in annual expenses, also included plans for "stores within a store highlighting products from Apple Corp, (APPL
) and Microsoft (MSFT
). CEO Hubert Joly stated in a conference call after the earnings release that, "While we are clear that there's much more work ahead, we have made measurable progress since we unveiled Renew Blue," he continued, "Pricing is the capability that is underdeveloped at Best Buy, It is an area that we will be making greater investments in over the next several quarters through improved analytics." With $65 million in expenses cut in the year's second quarter, the company's cuts for the last nine months have totaled $390 million. The Renew Blue plan also provides for increasing online sales, which rose by 10.5 percent from the same period one year ago. Same store sales for stores open more than one year fell by -0.4 percent, which was still a vast improvement over the -3.3 percent decline in 2012's second quarter. Best Buy continues being the U.S. largest consumer electronics retailer, with over $47 billion in sales last year. Despite rising competition from online retailers such as Amazon (AMZN
), and traditional stores such as Wal-Mart, Best Buy has taken measures to keep up with the economics of consumer electronics retailing. After more than tripling its stock price since November, Best Buy stock may still have room for more upside if the company can continue cutting costs and improving online sales. Other News About BBY Best Buy Co. Earnings Estimates Raised at Jefferies Group
Jeffries raises BBY stock target price to $42 per share. Best Buy Pulls A Shocker As Earnings Shatter Views
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Published on Aug 21, 2013
By Jay Hawk