Tuesday, June 16, 2009

Best Buy's Quarter

AlphaNinja -

Best Buy (BBY) reported this morning. Earnings-per-share of .42 beat the street's expectation of .34. The retailer guided full year earnings to a range of 2.50-2.90, and based on their usual conservative stance should come in above the consensus expectation of 2.79.

-Gross margin came in 160basis points above the prior year, at 25.3%
-SG&A(selling, general and administrative) costs, however, were up 130basis points to 21.9%
-Adjusted operating income up 26% to $348million.

So, operating income was up large because of the addition of 185 net new stores. International revenue was up 67%, and now comprises 26% of revenue. This is a positive for gross margin improvement, as European sales are generally higher-margin mobile phone sales. On the other hand, European stores have higher operating costs, contributing to the increase in the SG&A rate.

They also announced "Significant Market Share Gains During (the) Quarter" - weellll, that'll happen when your competitor (Circuit City) liquidates. They're performing admirably and trade at a modest 13PE, probably not a bad bet here. 2010 estimated FreeCashFlow yield (about $1billion in FCF) is about 7% -> what I would usually call a low yield for a consumer cyclical, but this company is expanding massively, so that Free Cash Flow is impressive.


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