Best Buy: Now That's How To Announce A Buyback

Last week I lamented about Home Depot's buyback, begging for "details, boys... details."

Execs at Home Depot (HD) should read Best Buy's (BBY) announcement yesterday. In announcing a $5.5 billion share repurchase, Best Buy said it has used a portion of this new share repurchase program immediately to execute an accelerated share repurchase program, with Goldman Sachs (GS) as counterparty, for the buyback of $3 billion of stock no later than February 2008. The company expects to fund the $3 billion ASR program through cash, short-term investments and interim borrowing.

The remaining $2.5 billion available under the new share buyback program is expected to be used subject to business results, market conditions and board approval.

Now, let's ignore the last $2.5 billion because there is no time frame for when, and if, it will ever be accomplished. What we do know is that $3 billion dollars worth of stock will be gone in eight months. At current prices, that means about 65 million shares or about 13% of the outstanding shares. We can now count on this giving 2008 (year ending March 2008) EPS a boost of 37 cents a share (13%) over 2007. This number assumes earning in 2008 equal to 2007. Any growth Best Buy delivers in excess of 2007 is just icing on the cake for investors.

In the most recent earnings announcement CEO Brad Anderson said, "In addition, as seen in the first quarter, we anticipate continuing our increased share repurchase activity."

Guess he meant what he said. For Home Depot investors, I hope CEO Frank Blake is paying attention.

BBY 1-yr chart: