Best Buy's Bold Quarter

Best Buy (NYSE: BBY  ) may have done better than anyone expected in the current climate, judging by its third-quarter earnings, but it's just not enough for many investors today.

Third-quarter net income at Best Buy increased 52% to $228 million, or $0.53 per share. Revenue increased by 17% to $9.93 billion, and same-store sales increased 6.7% for the quarter. Bear in mind, though, that Best Buy's November comps figure benefited from a calendar shift that tacked on an extra week of holiday shopping, which added 2.5 percentage points to the figure. Without that extra week, same-store sales are just about flat compared to the third quarter last year.

Furthermore, Best Buy's gross margin remained flat compared to this time last year, and the company said it benefited from lower promotional costs in a "more rational" U.S. retail environment. That's certainly better than a decrease, but then again, it would be nice to see Best Buy's gross margin increasing for a change. The retailer also experienced a shift in revenue to higher-priced items, like video game consoles, notebooks, flat-panel TVs, and GPS devices.

It looks like Motley Fool Stock Advisor  and Inside Value pick Best Buy really pulled off an admirable quarter, despite the worries about consumer spending that have dogged it, as well as rivals like Circuit City (NYSE: CC  ) , RadioShack (NYSE: RSH  ) , Target, Wal-Mart (NYSE: WMT  ) , and Costco (Nasdaq: COST  ) . Not only did Best Buy best Wall Street's expectations for the quarter, it was also able to raise its EPS estimate for this year to a range of $3.10 per share to $3.20 per share.

There are lots of reasons to like Best Buy, not least of which are its customer-centric approach, its strong growth internationally (it's expanding in China as well), and its recent additions of Apple (Nasdaq: AAPL  ) and Dell (Nasdaq: DELL  ) computers in its stores. I think it has competitive advantage compared to rivals like Circuit City and RadioShack, due to the customer-centric approach and its goal of having engaged employees.

There is still room for improvement, and some elements are worth pondering -- for example, my Foolish colleague Rich Smith questioned the logic of Best Buy's summer decision to increase its share buyback program, and the company is also increasing its debt load. Nonetheless, I view Best Buy as one of those retail leaders that certainly deserves serious consideration from long-term investors.

Check out some related Foolishness:

As Foolanthropy enters its second decade, join us in working to bring financial education to the world's children. Learn more about Foolanthropy's new direction.  

Read/Post Comments (0) | Recommend This Article (7)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

Be the first one to comment on this article.

Compare Brokers

Fool Disclosure

Sponsored Links

Leaked: Apple's Next Smart Device
(Warning, it may shock you)
The secret is out... experts are predicting 458 million of these types of devices will be sold per year. 1 hyper-growth company stands to rake in maximum profit - and it's NOT Apple. Show me Apple's new smart gizmo!

DocumentId: 556084, ~/Articles/ArticleHandler.aspx, 10/28/2016 6:39:35 AM

Report This Comment

Use this area to report a comment that you believe is in violation of the community guidelines. Our team will review the entry and take any appropriate action.

Sending report...

Today's Market

updated 9 hours ago Sponsored by:
DOW 18,169.68 -29.65 -0.16%
S&P 500 2,133.04 -6.39 -0.30%
NASD 5,215.97 -34.29 -0.65%

Create My Watchlist

Go to My Watchlist

You don't seem to be following any stocks yet!

Better investing starts with a watchlist. Now you can create a personalized watchlist and get immediate access to the personalized information you need to make successful investing decisions.

Data delayed up to 5 minutes

Related Tickers

10/27/2016 4:03 PM
BBY $38.48 Down -0.81 -2.06%
Best Buy CAPS Rating: *
AAPL $114.48 Down -1.11 -0.96%
Apple CAPS Rating: ****
CC.DL2 $0.10 Down +0.00 +0.00%
Circuit City Store… CAPS Rating: *
COST $150.86 Down -0.12 -0.08%
Costco Wholesale CAPS Rating: ****
DELL.DL $0.00 Down +0.00 +0.00%
Dell CAPS Rating: *
RSHCQ $0.00 Down +0.00 +0.00%
RadioShack CAPS Rating: *
WMT $69.83 Up +0.24 +0.34%
Wal-Mart Stores CAPS Rating: ***