Earnings Preview: Best Buy

Aug.20.12 | About: Best Buy (BBY)

Best Buy (NYSE:BBY) is expected to report Q2 earnings before the market open on Tuesday, August 21 with a conference call scheduled for 10:00 am ET.


Analysts are looking for a profit of 31c on revenue of $10.63B. The consensus range is 20c-38c for EPS, and revenue of $10.3B-$11B, according to First Call. In May, Best Buy provided FY13 adjusted EPS guidance of $3.50-$3.80, consensus $3.61 and interim CEO G. Mike Mikan said the company was not in any danger of going out of business. Mikan also commented that there would be no "sacred cows" in the company's turnaround efforts. During the quarter, CNBC reported that the company would cut 2,400 workers, including 600 Geek Squad employees in a restructuring effort. Additionally, founder Richard Schulze submitted a proposal to buy the company for $24-$26 per share, and Schulze said he had developed a business plan that addresses the many challenges Best Buy faces; the plan would likely involve cutting prices to better compete against Amazon (NASDAQ:AMZN) and other online retailers.

Analyst Views

Standard & Poor's cut its corporate credit rating and other ratings on Best Buy to BB+ from BBB-, a result of Schulze's proposal. Best Buy said its board offered Schulze an opportunity to conduct due diligence, but Schulze declined to participate. Analysts and investors will listen for an update on the Schulze situation, the company's restructuring efforts, as well as for comments on new CEO Hubert Joly, who comes to Best Buy from Carlson. According to sources, Best Buy has been a "hot topic" in buyout circles for some time, and a $7B-$8B debt raise for Best buy would be difficult, but not impossible. Piper Jaffray believes Schulze's offer is unlikely to result in a takeover due to the headwinds facing the company.