Best Buy Company Inc. (BBY), the leading specialty retailer of consumer electronic products, recently posted disappointing third-quarter 2012 results. The quarterly earnings of 47 cents a share missed the Zacks Consensus Estimate of 51 cents and declined 13% from 54 cents earned in the prior-year quarter.
However, on a reported basis, including one-time items, earnings plunged 22% to 42 cents a share.
Results in Detail
Richfield, Minnesota-based Best Buy stated that total revenue increased 2% year over year to $12,099 million. Best Buy marked a trend reversal and registered a 0.3% growth in comparable-store sales versus a decrease of 3.3% witnessed in the year-ago quarter.
However, total revenue also came below of the Zacks Consensus Estimate of $12,127 million.
Gross profit came inched down 1% to $2,944 million, whereas gross margin contracted 80 basis points (bps) to 24.3%. Operating income slipped 15% to $328 million, whereas operating margin contracted 50 bps to 2.7%.
Domestic segment revenue inched up 2% to $8,885 million due to a 0.9% increase in comparable-store sales. Comps in the prior-year quarter had decreased 5%. Domestic gross profit dipped 3% to $2,109 million during the quarter while gross margin came in at 23.7%.
The Domestic segment experienced comparable-store sales growth across mobile phones, mobile computing (including tablets), eReaders, appliances and movies. These were offset by a fall witnessed across digital imaging and gaming. However, Domestic online revenue jumped 20%.
It is to be noted that television comparable store sales declined in low single digit, however, sales marked a sequential improvement from prior quarters. Domestic segment mobile phones marked a 9% increase in comparable store sales while connections increased 8%.
International revenue crept up 1% to $3,214 million, however comparable-store sales decreased 1.7% compared with an increase of 2.3% in the prior-year quarter reflecting a decline in comparable store sales of small box stores in Europe. International adjusted gross profit increased 4% to $835 million during the quarter while gross margin came in at 26%.
Balance Sheet, Share Buybacks & Dividend
Best Buy ended the quarter with cash and cash equivalents of $2,392 million, total long-term debt of $1,687 million, and shareholders’ equity of $6,376 million.
During the quarter under review, the company bought back approximately 12.6 million shares at a price of $25.47 per share, aggregating $320 million. Year-to-date, the company repurchased 41.8 million shares at an average price of $28.30 per share, aggregating $1.2 billion.
Moreover, the company also paid a quarterly dividend of 16 cents per share, aggregating $58 million.
What Guidance Says?
Best Buy stood by its earlier projection for fiscal 2012 and expects revenue between $51 billion to $52.5 billion, while comparable store sales are expected to remain flat or decline by 3%.
Moreover, management also reiterated its fiscal 2012 adjusted earnings guidance range to $3.35 to $3.65 per share.
Despite of cost cutting measures, gross margin is expected to decline by 50 basis points.
Currently, we have a long-term Neutral rating on the stock. However, Best Buy, which faces competition from Wal-Mart Stores Inc. (WMT), holds a Zacks #2 Rank that translates into a short-term Buy rating.