Best Buy (BBY) Stock Drops on Same-Store Sales Expectations

Shares of Best Buy Co. Inc. (BBY), were trading down -4.05 or -10.15 percent to $35.82 per share in Thursday's premarket, after the company released its revenue results for the nine weeks ending on January 4th, 2015 early this morning. The company reported an increase in revenue, but expects no growth in same store sales for the first two quarters of its next fiscal year. Best Buy stock closed at $39.91 per share, up +0.81 or +2.07 percent in Wednesday's regular trading session.

Founded in 1966 as an audio specialty store, Richfield, Minnesota based Best Buy Co. renamed in 1983 concentrating more on consumer electronics.
The company is the world's largest retailer of consumer electronics products operating over 1,100 stores domestically, as well as more than 100 Best Buy Express automated retail stores operated by Zoom Systems in malls and airports.

Best Buy reported that comparable store sales in the United States increased +2.6 percent for the two month period, while international comparable store sales declined by -3.6 percent. Comparable online sales increased by +13.4 percent on higher traffic and conversion rates. Nevertheless, growth was significantly lower than the +23.5 percent increase in online sales in the same period one year ago, due to the launch of the Xbox 1 and PS4 new gaming consoles.

Hubert Joly, Best Buy president and Chief Executive Officer expressed confidence in the results, however, he noted that "there are also external pressures that we discussed last quarter that are driving structural industry changes, including (1) deflationary pricing; (2) weak industry demand in NPD-reported Consumer Electronics categories; (3) declining demand for extended warranties; as well as (4) exchange rate volatility in our International businesses.

The company's Chief Financial and Accounting Officer, Executive Vice President Sharon McCollam reiterated, saying that, "Continuing on Hubert's FY16 discussion, we do expect the impact of the external pressures he laid out to continue throughout FY16 and the impact of the incremental investments to begin in the first quarter. Additionally, we believe that the positive Domestic sales trends that we saw in mobile phones and home theater during the holiday period, in addition to the share gains we saw across other NPD-reported Consumer Electronics categories, were partially driven by the excitement around high-profile products and will not likely continue at holiday levels.

She went on to say that the company is now expecting comparable sales to be flat to negative in the first half of the company's fiscal year 2016, with non-GAAP operating income to decline by -30 to -50 basis points. Best Buy excluded revenue from its Five Star business in China in the current release due to the sale of the business in December of 2014.

Best Buy stock hit a new recent high yesterday before this morning's announcement. In addition to reacting negatively to the company's outlook, profit taking could also be a factor in the selloff. The company will report earnings on March 3rd.

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Published on Jan 15, 2015
By Jay Hawk
Jay Hawk
Jay Hawk enjoyed a 12-year professional financial markets career incorporating extensive first hand futures and options experience obtained by trading in the stock, commodity and forex markets on U.S. exchanges. Since retiring as a full-time financial market professional, he has been actively trading stock, commodities, forex and options for his own account and managing funds for others, as well as writing financial market commentary and educational articles.

Copyrighted 2016. Content published with author's permission.

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