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HenryTo
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 Posted: Tue Sep 12, 2006 6:23 am Post subject: Best Buy (BBY) |
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Consensus estimates for fiscal 2007 is actually $2.80 - while BBY guides to a range of $2.65 to $2.80. Stock down a little bit this morning:
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Best Buy profit rises, backs year forecast
Last Update: 8:08 AM ET Sep 12, 2006
NEW YORK (MarketWatch) - Best Buy Inc. on Tuesday reported higher fiscal second quarter profit, helped by recent acquisitions and higher average transactions. The Minneapolis-based electronics retailer said it earned $230 million, or 47 cents a share, compared to $188 million, or 37 cents a share. Total revenue for the second quarter rose 13% to $7.6 billion. Analysts, on average, expected it to earn 44 cents a share on revenue of $7.54 billion, according to Thomson First Call. Sales at stores open at least one year rose 3.7%. The company backed its fiscal 2007 earnings forecast of $2.65 to $2.80 a share.
Last edited by HenryTo on Tue Dec 12, 2006 7:56 am; edited 1 time in total |
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HenryTo
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| Posted: Tue Apr 10, 2012 6:19 pm Post subject: |
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Morningstar on BBY's CEO change. Abandoning ship--stock up initially but closed down nearly 6% for the day.
| Quote: | | In a surprise announcement, Best Buy BBY CEO Brian Dunn has stepped down from his post under what is being called a "mutual agreement that it was time for new leadership to address the challenges that face the c ompany." Director Mike Mikan, formerly executive vice president and chief financial officer of UnitedHealth Group UNH, will serve as interim CEO, while founder Richard Schulze will remain chairman. Our $25 fair value estimate remains in place following this announcement. |
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rffrydr
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| Posted: Mon Apr 02, 2012 9:13 pm Post subject: |
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And remember when the interwebs were gonna kill tv? Well....they certainly changed it. And tv changed it back.
Certainly is an imagined challenge: selling cutting edge electronics in an old fashioned store. The only thing they've got is, instant gratification. Hey 
Wait 'til Amazon starts taking tax and we get a few more jobs under our belts. And they'll always be able to sell hip fridges. I'll be watching their debt.
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HenryTo
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rffrydr
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| Posted: Fri Mar 30, 2012 8:34 am Post subject: |
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By focusing on internet link its becoming a "hybrid." Sears can do a lot more of this too.
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HenryTo
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HenryTo
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| Posted: Fri Jan 06, 2012 2:29 pm Post subject: |
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Morningstar's BBY December update.
| Quote: | | Like several retailers in our coverage universe, Best Buy's BBY December sales update suggests that traffic was difficult to come by following the Black Friday weekend, at least until the week before the Christmas holiday season. For the month, comparable sales fell 1.2%, including 0.4% and 4.3% declines in the domestic and international segments, respectively. Not surprisingly, categories such as tablet computers and e-readers (triple-digit comparable sales) and mobile phones (20% comparable sales) were positive sales drivers in the U.S., but were more than offset by low-double-digit retrenchments in the gaming and digital imaging categories. The international comparable-sales decline was partly the result of unfavorable foreign exchange rates, but also weak demand in more economically sensitive regions such as Europe and Canada. We maintain our long-term view that market share and store-level productivity will be difficult to sustain as rivalry with mass merchants and online retailers intensifies and price competition in wireless and mobile computing categories escalates. Despite the lower-than-anticipated top-line results, management reiterated its full-year guidance, including revenue between $51 billion and $52.5 billion (an increase of 1.5%-4.4%, including 1.5%-2.0% from an extra week in the fiscal year) and a flat to a 3% decline in comparable-store sales. Although we suspect that late-season traffic gains stemmed from more promotional activity, management also reaffirmed its full-year operating margin dollar (coming in between a 5% decline and 2% growth) and adjusted earnings per share targets ($3.35-$3.65), suggesting markdown cadence was kept somewhat in check. We plan to make some adjustments to our near-term assumptions based o n December results, which may push our $30 fair value estimate down by a few dollars. While the shares appear moderately undervalued, we'd encourage a wider margin of safety before building a position, at least until Best Buy takes more aggressive steps to streamline its business and improve its competitive positioning, including a greater reduction in big-box square footage and increased investment in its online business. Although management claimed it experienced market share gains during December, we're skeptical that these gains came at the expense of Best Buy's most formidable competitors. Domestic online sales grew 26% for the month, but our due diligence suggests that Best Buy lost consumer electronics share to Amazon AMZN during the period, which we expect to deliver fourth-quarter revenue growth of approximately 47%. Additionally, with Best Buy posting positive appliance category growth during the period, we believe some of Best Buy's market share gains came at the expense of Sears Holdings SHLD, which attributed quarter-to-date comparable-sales declines largely to consumer electronics and appliances. |
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rffrydr
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| Posted: Fri Jan 06, 2012 11:01 am Post subject: |
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This may be one of the seminal articles of the year:
http://www.bloomberg.com/news/2012-01-05/best-buy-seen-appreciating-59-as-cash-rich-retailer-invites-lbo-real-m-a.html
Not only does it underscore the ridiculous values placed on some of these cyclicals on both absolute and in the context of a retail recovery, but it rejiggers our forgotten Private Equity (Bull's best friend) memories who missed '09 and have been sitting on their hands ever since. Well now is a whole new year, baby! Animal Spirits have been hibernating.
And that's playing out today on light sales stats met with buys.
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HenryTo
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HenryTo
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| Posted: Tue Sep 13, 2011 7:11 pm Post subject: |
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Morningstar on BBY's 2Q earnings:
| Quote: | | After posting nominally better-than-expected results last quarter, Best Buy's BBY second-quarter results saw the return of several unfavorable longer-term trends, including comparable-store sales declines across several core categories, an inability to defend market share, and margin compression stemming from heightened promotional activity and operating expense deleverage. We plan to make some moderate changes to our model based on year-to-date results and management's second-half outlook, which will likely result in a moderate reduction to our fair value estimate. Still, there is no change to our negative view of Best Buy's long-term cash flow potential based on expectations of intensifying rivalry with mass merchants and online retailers, increased price competition in the wireless category, and waning store productivity amid an increasingly competitive consumer electronics retail landscape. There were a few silver linings during the quarter--mobile computing (including tablets) comps increased 9% and Five Star China comps grew 7%--but softness in categories like televisions, gaming, digital imaging, and physical media (leading to a 2.8% decline overall) underscored the twin headwinds of intensifying competition from online and other mass merchants and the evolving nature of consumer electronics distribution (including digital media sales and direct-to-consumer efforts from key equipment manufacturers). Best Buy Mobile, a key sales driver the past few quarters, also disappointed with a 5% comp decline. Although a lack of new smartphone launches during the quarter played a part, we believe Best Buy's relative underperformance in the mobile category is indicative of the increasingly competitive nature of mobile phone retailing. Online sales increased 13% for the quarter, but according to our estimates, fell short of broader consumer electronics e-commerce sales over the corresponding period. Operating margins declined 110 basis points to 2.5% due to the aforementioned competitive pressures, primarily through increased promotional activity across the U.S. and Europe, operating expense deleverage, and increased advertising support. In what is shaping up to be a increasingly competitive retail landscape featuring volatile consumer spending patterns, management's full-year revenue guidance of $51 billion-$52.5 billion (an increase of 1.5%-4.4%, including 1.5%-2.0% from an extra week in the fiscal year) and flat to a 3% decline in comparable-store sales appears mildly optimistic, and we plan to adjust our model accordingly. Management revised its operating margin dollar expectations downward (now anticipating a range between a 5% decline and 2% growth, compared to earlier expectations between 0% and 7%) but raised its earnings per share outlook to $3.35-$3.65 (versus the previous outlook of $3.28-$3.53) due to more aggressive share repurchase activity. While we generally view a company's efforts to enhance shareholder returns through share repurchases in a positive light, we'd prefer to see best Buy's free cash flow used to reverse its weakening competitive positioning, including a more competitive digital media platform and greater emphasis on smaller-box formats. |
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HenryTo
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| Posted: Tue Jun 21, 2011 11:37 am Post subject: |
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Morningstar's latest update on BBY:
| Quote: | | Ahead of its annual shareholders' meeting, Best Buy BBY announced Tuesday that it will raise its quarterly dividend to $0.16 per share from $0.15, a 7% increase that was in line with our model assumptions. We view the move as a signal of management's commitment to returning cash to shareholders, and an indication of its relative comfort with the macro and industry operating environments. The $0.64 annualized dividend brings Best Buy's payout ratio to just under 20% of our estimated fiscal 2012 earnings per share estimate. Best Buy still lags the dividend payout of other big-box retailers (Home Depot HD is near 40%, Wal-Mart WMT 35%, Lowe's LOW near 30%, Staples SPLS 30%, Costco COST 30%, a nd Target TGT around 25%), though we find the payout ratio appropriate in light of ongoing measures to improve operations, including a reduction in big-box format square footage, elevating online sales, and emphasizing Best Buy Mobile small-format stores in the United States and Five Star stores in China. The firm also announced an updated $5 billion share buyback program, which replaces the existing $5.5 billion program that had $800 million of authorization as of May 2011. We project that Best Buy will generate just over $7 billion in cumulative free cash flow (before dividends and share repurchases) over the next five years, providing it with ample cash to support growth and repositioning efforts--both domestic and international--while still supporting shareholder-enhancing activity. Given this strong free cash flow and the firm's moderate leverage--debt/capital was around 0.24 at the end of May 2011--we continue to support the firm's BBB- credit rating despite these shareholder-friendly actions. The stock currently trades at a moderate discount to our $38 fair value estimate, and we believe that near-term results could surprise to the upside through contribution from Best Buy Mobile, international growth initiatives, and depressed market expectations. However, we still harbor long-term concerns over profitability due to expectations of intensifying rivalry with mass merchants and online retailers, increased price competition in the wireless category, and waning store productivity amid an increasing competitive consumer electronics retail landscape. We caution investors, based on our outlook for diminishing economic returns over time. |
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HenryTo
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HenryTo
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| Posted: Thu Mar 24, 2011 6:44 pm Post subject: |
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Morningstar on BBY's 4Q earnings and full-year forecast:
| Quote: | Best Buy Outperforms in 4Q, but Long-Term Concerns Persist
Best Buy's BBY fourth-quarter results had a familiar feel, as ongoing weakness in certain categories (television, entertainment software, mobile computing) were partly offset by positive gross margin contribution from Best Buy Mobile and strength in tablet computers. Although the market has taken a favorable view of the quarterly results, we remain concerned about Best Buy's ability to defend market share from mass merchant rivals, online retailers, and consumer electronics manufacturers themselves. Certain parts of management's recently announced plan to drive improved shareholder returns strike us as prudent moves, including an emphasis on Best Buy Mobile small-format stores in the United States and Five Star stores in China, the closure of operations in Turkey and Best Buy-branded stores in China (which have not fared as well as Five Star), and supply-chain restructuring in the U.S. However, these improvements do not address the underlying industry headwinds Best Buy faces, which will probably become more pronounced over the coming years. Management's calendar 2011 outlook fell short of our estimates, but we do not anticipate a material change to our $40 fair value estimate. Although shares look modestly undervalued based on our current assumptions, we'd encourage a wider margin of safety before taking a position, given the potentially volatile nature of future cash flows.
Gross margins were the highlight for the quarter, increasing 40 basis points to 24.4% (excluding restructuring charges) thanks to increased connection transactions at Best Buy Mobile and more effective promotional spending. However, we doubt these rates will be sustainable over the long run, given increased competition from mass merchants (which have expanded their mobile phone offerings) and wireless service providers themselves (including the potential merger between AT&T T and T-Mobile, a unit of Deutsche Telekom DTEGY). Additionally, we see few signs that measures to offset double-digit sales declines in the higher-margin entertainment software category have had success (including new product introductions and a used video game program), suggesting additional margin pressures over the foreseeable future.
Management introduced underwhelming guidance for calendar 2011, reflective of the challenges facing consumer electronics retailers. Management's full-year outlook, including revenue of $51 billion-$52.5 billion (an increase of 1.5%-4.4%, including 1.5%-2.0% from an extra week in the fiscal year), flat to a 3% decline in comparable-store sales, operating income dollar increase between 0% and 7%, and earnings per share of $3.28-$3.53 (a increase of 4%-12%, including expected share repurchases), appears realistic. We believe the company's efforts to enhance shareholder returns could be additive over the short run, but over a longer horizon, we believe more aggressive measures may be needed to bolster Best Buy's weakening competitive positioning. |
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rffrydr
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HenryTo
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| Posted: Tue Dec 14, 2010 3:47 pm Post subject: |
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Morningstar on BBY's 3Q earnings:
| Quote: | | We plan to reduce our fair value estimate for Best Buy BBY, as third-quarter results validated a number of our concerns about the firm's ability to defend market share from mass merchants and consumer electronics manufacturers over time. Going into the quarter, we had assumed that soft television and entertainment software sales would offset solid gains from mobile phones and tablet computers. However, the 5% decline in domestic comparable-store sales was worse than anticipated--driven by double-digit declines in TVs and entertainment software--and suggests that competition may be encroaching faster than we forecast. We believe mass merchants like Wal-Mart WMT and Target TGT have vastly improved their electronics assortments over the past several years, giving consumers less incentive to visit specialty stores without the enticement of aggressive pricing. The company also finds itself in a precarious competitive position relative to key suppliers like Apple AAPL, which has captured incremental market share by bolstering its own retail and direct sales channels. These factors support the viewpoint that Best Buy lacks an economic moat, in our view. Gross margins continued to track slightly ahead of expectations (up 60 basis points to 25.1%) thanks to increased competition from Best Buy Mobile, more effective promotional spending, and a reclassification of vendor support dollars from selling, general, and administrative costs. However, we doubt these rates will be sustainable over the long run, given increased competition from mass merchants (which have expanded their mobile phone offerings) and wireless service providers themselves. Additionally, there are few signs that measures to offset double-digit sales declines in the higher-margin entertainment software category have had success (including a used video game program), suggesting additional margins pressures over the foreseeable future. Management reduced its full-year earnings per share forecast to $3.20-$3.40 from $3.55-$3.70, which appears realistic in light of the third-quarter top-line pressures. We plan to adjust our full-year earnings outlook to reflect lower revenue growth assumptions and subsequent fixed operating cost deleverage. We also plan to use more conservative revenue growth (low- to mid-single-digit growth, compared with current estimates in the midsingle digits) and operating margin assumptions (remaining in the mid-4% range versus current estimates around 5%) over the next several years, given Best Buy's weakening competitive position. |
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HenryTo
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| Posted: Tue Sep 14, 2010 10:05 am Post subject: |
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Morningstar on BBY's 2Q earnings:
| Quote: | | We are leaving our fair value estimate for Best Buy BBY unchanged, as second-quarter results were in line with our expectations of soft top-line results but modest operating margin growth. Consistent with results from other consumer electronics retailers, sluggish television and entertainment software sales negated solid gains in mobile phones, appliances, and mobile computers during the quarter, resulting in a slight comparable-store sales decline (0.1%). We were encouraged by a healthy improvement in the gross margin rate (up 130 basis points to 25.7%), driven by improved gross margins at Best Buy Mobile, more effective promotional spending, and reclassification of vendor support dollars from selling, general, and administrative costs. However, we continue to have concerns about the sustainability of gross margin gains. given increased competition from mass merchants and wireless service providers as well as the continued mix shift away from higher-margin categories like entertainment software. We also remain cautious about the strengthening competitive positions of larger consumer electronics manufacturers--Apple AAPL and Microsoft MSFT in particular--as Best Buy noted a decline in its domestic market share in part because of constrained inventories during the initial iPad launch. Management's updated full-year outlook, including revenue of about $52 billion (mid-single-digit growth), comparable-store sales growth of 1%-2%, and 40-55 basis points of operating margin improvement (implying a full-year operating margin of about 5%), appears realistic on the basis of year-to-date results. Management increased its full-year earnings per share forecast range by $0.10, to $3.55-$3.70, though much of the increase was due to share-repurchase activity in the first half of the year. On the basis of the greater-than-expected share-repurchase activity, we plan to make a few adjustments to our full-year earnings per share outlook (which was previously a shade under the low end of the revised outlook), but our long-term model assumptions remain intact. |
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