No Slowdown at Best Buy

Investors have soured on many retailers lately, given all the recent talk of cash-strapped consumers sweating rising interest rates and the high price of gas. So far, Best Buy (NYSE: BBY  ) seems be weathering any storminess quite well, judging by its latest earnings release.

In the first quarter, Best Buy's earnings increased 38% to $234 million, or $0.47 per share. Sales increased 14% to $7 billion. Same-store sales increased 4.9%, which the company said resulted in part from an increase in average transaction size, as the company's revenue mix shifted toward higher-priced merchandise like flat-panel televisions, MP3 players and related accessories, notebook computers, and computer services. (Fellow Fool Nate Parmelee emphasized this increase in the price of items, as opposed to an increase in the number of transactions, last quarter as well.)

To what does Best Buy owe the impressive increase in earnings? The company attributed the jump to cost-cutting; it also improved its operating income, lowered SG&A costs, and enjoyed strong sales growth.

David Gardner recommended Best Buy to Motley Fool Stock Advisor subscribers quite some time ago, and in a Foolish Forecast yesterday, Fool contributor Rich Smith reminded us that David considers Best Buy an "evergreen" company, a leader in its industry. Indeed, Best Buy may face competitors from RadioShack (NYSE: RSH  ) and CircuitCity (NYSE: CC  ) to Wal-Mart (NYSE: WMT  ) and Amazon.com (Nasdaq: AMZN  ) , but Best Buy has many innovative elements -- from expanding its services to placing its stores based on desired customer traits -- to keep it on top of its game.

If you have any interest in reading about a large company that wants to retain its growth tradition, you might want to give Best Buy's conference call a listen; growth isn't just about the company's plans in China. CEO Brad Anderson explained how Best Buy is attempting to harness employees' input to make the company more customer-centric. Best Buy apparently doesn't want to lose touch with the people on the front lines; staying focused on customers is crucial to the company's plans to keep its growth trajectory going for the long term.

A quick glance at Best Buy's one-year chart illustrates investors' unease over the last couple of months. However, this quarter's heartening numbers, matched with a focus on its long-term position, emphasize that Best Buy is a stock for the long haul.

Best Buy and Amazon.com areMotley Fool Stock Advisorrecommendations. Wal-Mart is aMotley Fool Inside Valueselection.

Alyce Lomax does not own shares of any of the companies mentioned.


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