Best Buy Announces Record Buyback

Electronics retailer Best Buy surprised investors Wednesday by announcing it will buy back up to $5.5 billion of its shares over the next few years, alleviating concerns the company was going to make a major acquisition. The buyback, which represents about a quarter of the company's outstanding stock, will be funded primarily through the company's cash and cash equivalents, which are currently at about $2.8 billion. The company also announced a 30% quarterly dividend increase, its biggest ever, and plans to open 400 more stores in the U.S. "Our confidence in the company has never been at a higher level," said Best Buy Chairman Richard Schulze. Best Buy holds 20% of the North American market for consumer products, a figure the company says is growing while its competitors are struggling. During April's Q4 conference call, management said they were considering growing the company through acquisitions, a prospect that proved unpopular. "After facing a nearly continuous barrage of investors concerned about its excess cash position," wrote Bernstein Research analyst Colin McGranahan, "Best Buy moved more aggressively than we had expected." Stifel Nicolaus analyst David Schick said the buyback is important to "assuage investors' fears of potential for massive acquisition." Shares closed up 3.75% at $46.67.

Sources: Dow Jones, Wall Street Journal, Bloomberg, MarketWatch, TheStreet.com
Commentary: Best Buy Badly Misses EPS Estimates, Sending Shares Lower • Apple/Best Buy Partnership Would Be Spectacular • Why Best Buy Is Looking Good and Eddie Lampert Should Buy Circuit City
Stocks/ETFs to watch: Best Buy Co., Inc. (BBY). Competitors: Circuit City Stores Inc. (CC), RadioShack Corp. (RSH), Wal-Mart Stores Inc. (WMT). ETFs: Retail HOLDRs (RTH), PowerShares Dynamic Consumer Discretionary (PEZ), Vanguard Consumer Discretionary VIPERs (VCR)
Conference call transcripts: Best Buy F1Q08

Seeking Alpha's news briefs are combined into a pre-market summary called Wall Street Breakfast. Get Wall Street Breakfast by email -- it's free and takes only seconds to sign up.