Best Buy: It's Getting Better, But for How Long?

On Tuesday, Best Buy (NYSE: BBY  ) will release its latest quarterly results. The key to making smart investment decisions on stocks reporting earnings is to anticipate how they'll do before they announce results, leaving you fully prepared to respond quickly to whatever inevitable surprises arise. That way, you'll be less likely to make an uninformed knee-jerk reaction to news that turns out to be exactly the wrong move.

Best Buy has struggled for years under the weight of competitive pressures from online retailers, as the electronics retailer has been one of the primary victims of the showrooming trend whereby shoppers go to a store to see items that they then buy elsewhere online for less. Yet more recently, the company has shown signs of turning its fortunes around. Let's take an early look at what's been happening with Best Buy over the past quarter and what we're likely to see in its quarterly report.

Stats on Best Buy

Analyst EPS Estimate

$0.25

Change From Year-Ago EPS

(65%)

Revenue Estimate

$10.64 billion

Change From Year-Ago Revenue

(8.3%)

Earnings Beats in Past 4 Quarters

2

Source: Yahoo! Finance.

Will Best Buy keep moving forward this quarter?
Analysts have had mixed views on Best Buy's earnings prospects recently, as they've cut their estimates for the just-ended quarter by $0.20 per share but modestly raised their full-year fiscal 2014 and 2015 estimates. The stock has squarely focused on long-term potential for the company, as shares have soared 80% since mid-February.

Best Buy's actions over the past quarter have contributed toward CEO Hubert Joly's "Renew Blue" turnaround strategy, under which the company is looking to improve its customer service, boost its presence in e-commerce, and cut its overhead. For instance, Best Buy's decision to match prices of Amazon.com (NASDAQ: AMZN  ) and other online retailers as well as retail-store competitors is geared not only toward getting people to buy more in-store purchases but also at driving customers toward seeing Best Buy's website as a low-price alternative.

One big initiative announced in early April involves smartphone giant Samsung using the store-within-store format at 1,400 Best Buy locations. For Samsung, the move is clearly an attempt to put together some form of competition against Apple (NASDAQ: AAPL  ) and its huge retail presence through its highly successful Apple Stores, yet without the massive capital expenditure that would be necessary to establish its own independent store network. For Best Buy, though, the potential could be much higher, as it could bring in more traffic not just for smartphone purchases but for its other merchandise.

Best Buy has also made some strategic moves during the quarter to refocus on its core business. Less than a month ago, it sold its 50% stake in the Best Buy Europe joint venture to partner Carphone Warehouse, raising about $775 million in cash and eliminating the distraction of having to deal with the chain in a tough economic environment in Europe right now.

Another long-awaited boost could come if the proposed federal Internet sales-tax bill becomes law. Amazon, eBay (NASDAQ: EBAY  ) , and other online retailers without physical presences in many states have had a big advantage over Best Buy, and given the high-ticket items that Best Buy sells, closing the sales-tax gap will make the substantial savings from showrooming disappear if the measure passes.

In Best Buy's report, watch for comments from management on how its recent initiatives are bearing fruit with real financial improvements. As good as the plan's proposals sound, it's important for the company to point to tangible results to prove that Best Buy is actually moving in the right direction.

The battle between bricks-and-mortar stores and e-commerce battle will rage on for a while, and to get more information about the unanswered questions about Best Buy's future, turn to the Fool's premium research report on the stock. Inside, you'll get in-depth analysis of how new leadership will perform, whether a smaller store format work out for the company, and much more. Simply click here now to claim your comprehensive report today.

Click here to add Best Buy to My Watchlist, which can find all of our Foolish analysis on it and all your other stocks.


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