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.

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