Still a Must-Watch Retailer

Good news, Best Buy (NYSE: BBY  ) fans and shareholders: The electronics retailer emerged from a difficult holiday season surprisingly unscathed.

Fourth-quarter net income increased 36.7%, to $779 million, or $1.82 per share. Revenue increased 12%, to $16.6 billion. Even more hearteningly, Best Buy's same-store sales increased a healthy 7%, compared to the 4.9% drop in comps this time last year.

The results topped Wall Street analysts' expectations, and Best Buy's guidance for fiscal 2011 didn't disappoint, either. The company expects revenue growth of 5% to 7%, same-store sales growth of 1% to 3%, and earnings of $3.45 per share to $3.60 per share (a 10% to 14% year-over-year increase). Its earnings projection doesn't include the effects of the share buyback policy the company plans to resume.

Best Buy pointed to domestic sales strength in notebook computers, flat-panel televisions, and mobile phones, and said its comps were driven by an increase in shoppers' average tickets. Meanwhile, volume growth more than offset declines in average selling prices. This is particularly heartening compared to Wal-Mart's (NYSE: WMT  ) quarterly tidings; the megaretailer blamed price deflation in electronics (as well as food) for its fairly lackluster results. Then again, Best Buy faced fairly easy comparisons, while Wal-Mart's were more difficult.

Still, Best Buy is holding up quite well to rivals such as Wal-Mart, Target (NYSE: TGT  ) , and Costco (Nasdaq: COST  ) . Although smaller, more obscure electronics retailer Conn's (Nasdaq: CONN  ) stock is surging today, don't be fooled into thinking it had a Best Buy-like blowout. Its total revenue plunged 25% in its most recent quarter.

Best Buy may also benefit greatly from a newly nonexistent rival: Circuit City. Best Buy increased market share by 2.6 percentage points in the quarter.

The company also performed well abroad, increasing revenue 15%. In China, comps rose 34%, while comps at Best Buy Europe climbed 4%.

Last quarter, Best Buy seemed to make some investors nervous, with good reason. Now that anxiety may be abating. The retailer survived the holiday price wars with flying colors, despite Wal-Mart's saber-rattling about its refusal to yield on price, and the plethora of penny-pinched consumers on tight holiday budgets.

Best Buy doesn't even look outrageously pricey. At 13 times forward earnings, it's on par with Wal-Mart and Target, and more reasonable than Costco's 19 and Conn's 16. The coming year may be difficult, since our economy's not out of the woods yet, but Best Buy is a strong contender for whatever dollars consumers are willing to spend.

I've long admired Best Buy for its unique customer-centric approach and innovative ways of doing business. The retailer's results give me even more reason to feel good about Best Buy for the long haul.

Best Buy, Costco, and Wal-Mart are Motley Fool Inside Value picks. Best Buy and Costco are Stock Advisor recommendations. The Fool owns shares of Best Buy and Costco. Try any of our Foolish newsletter services free for 30 days.

Alyce Lomax does not own shares of any of the companies mentioned. The Fool has a disclosure policy.


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