Will Best Buy Surprise Investors Tomorrow When It Reports Earnings?

Best Buy will report its fourth-quarter results before the bell on Thursday, but investors may be in for an unpleasant surprise.

Feb 26, 2014 at 4:05PM

Best Buy (NYSE:BBY) could surprise investors when it reports fourth-quarter earnings tomorrow before the opening bell, though not in a good way. The big-box chain has struggled to find its footing lately in a retail landscape that's now dominated by online retailers such as Amazon.com (NASDAQ:AMZN). Moreover, if Best Buy's revenue results from the all-important holiday shopping season are any indication, it could be a rough year for the retailer.

Best Buy

From Best Buy to worst buy
The consumer electronics retailer release holiday sales figures last month that failed to impress. For the first two months of the quarter, Best Buy said same-store sales declined 0.8% because the company was forced to offer more holiday discounts in order to better compete with its rivals. For comparison, Wall Street was looking for a 2% rise in comparable sales in the period, according to TheStreet. "This investment in pricing did come with a higher-than-expected cost, and we now estimate our fourth quarter non-GAAP operating income rate will be 175 to 185 basis points lower than last year," said Hubert Joly, Best Buy's president and chief executive.

The challenging holiday season could also negatively affect Best Buy's full-year results, which the company reports tomorrow. That's because the holiday shopping season can account for as much as 40% of annual revenue for some retailers.

Moreover, Best Buy's upsetting holiday sales report highlights the competitive pricing environment that Best Buy faces as it attempts to defend its market share against Amazon. Keeping expenses low is easier for Amazon because, unlike Best Buy, the e-commerce giant doesn't bear the costs of operating large physical store locations. Nevertheless, Best Buy has done a good job of turning this weakness into strength lately.

Making every store count
As part of its Renew Blue turnaround efforts, Best Buy was able to use its physical storefronts as a defense against Amazon during the holidays. The retailer introduced its ship-from-store program at more than 400 Best Buy locations in the period, allowing online orders to be filled more quickly than ever before.

In fact, as my colleague Dan Moskowitz pointed out earlier this month, Best Buy actually delivered products faster than Amazon during the holidays. As a result, Best Buy was able to grow its comparable online sales as much as 23.5% during the holiday period. Still, beating analysts' estimates in Q4 won't be easy given the greater-than-expected investment in pricing the retailer deployed during the holiday quarter. As it stands, Wall Street is looking for quarterly earnings of $1.01, on revenue of $14.66 billion. This is significantly below analysts' prior profit guidance for earnings per share of $1.62 in the period.

Shares of Best Buy have fallen more than 36% so far this year, and investors could push the stock even lower if the company surprises to the downside in tomorrow's earnings announcement. Best Buy shares were priced around $25.57 in midday trading today.

The next step for you
Want to profit on business analysis like this? The key for your future is to turn business insights into portfolio gold through smart and steady investing... starting right now. Those who wait on the sidelines are missing out on huge gains and putting their financial futures in jeopardy. The Motley Fool is offering a new special report, an essential guide to investing, which includes access to top stocks to buy now. Click here to get your copy today -- it's absolutely free.

Tamara Rutter owns shares of Amazon.com. The Motley Fool recommends and owns shares of Amazon.com. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

Money to your ears - A great FREE investing resource for you

The best way to get your regular dose of market and money insights is our suite of free podcasts ... what we like to think of as “binge-worthy finance.”

Feb 1, 2016 at 5:03PM

Whether we're in the midst of earnings season or riding out the market's lulls, you want to know the best strategies for your money.

And you'll want to go beyond the hype of screaming TV personalities, fear-mongering ads, and "analysis" from people who might have your email address ... but no track record of success.

In short, you want a voice of reason you can count on.

A 2015 Business Insider article titled, "11 websites to bookmark if you want to get rich," rated The Motley Fool as the #1 place online to get smarter about investing.

And one of the easiest, most enjoyable, most valuable ways to get your regular dose of market and money insights is our suite of free podcasts ... what we like to think of as "binge-worthy finance."

Whether you make it part of your daily commute or you save up and listen to a handful of episodes for your 50-mile bike rides or long soaks in a bubble bath (or both!), the podcasts make sense of your money.

And unlike so many who want to make the subjects of personal finance and investing complicated and scary, our podcasts are clear, insightful, and (yes, it's true) fun.

Our free suite of podcasts

Motley Fool Money features a team of our analysts discussing the week's top business and investing stories, interviews, and an inside look at the stocks on our radar. The show is also heard weekly on dozens of radio stations across the country.

The hosts of Motley Fool Answers challenge the conventional wisdom on life's biggest financial issues to reveal what you really need to know to make smart money moves.

David Gardner, co-founder of The Motley Fool, is among the most respected and trusted sources on investing. And he's the host of Rule Breaker Investing, in which he shares his insights into today's most innovative and disruptive companies ... and how to profit from them.

Market Foolery is our daily look at stocks in the news, as well as the top business and investing stories.

And Industry Focus offers a deeper dive into a specific industry and the stories making headlines. Healthcare, technology, energy, consumer goods, and other industries take turns in the spotlight.

They're all informative, entertaining, and eminently listenable. Rule Breaker Investing and Answers are timeless, so it's worth going back to and listening from the very start; the other three are focused more on today's events, so listen to the most recent first.

All are available for free at www.fool.com/podcasts.

If you're looking for a friendly voice ... with great advice on how to make the most of your money ... from a business with a lengthy track record of success ... in clear, compelling language ... I encourage you to give a listen to our free podcasts.

Head to www.fool.com/podcasts, give them a spin, and you can subscribe there (at iTunes, Stitcher, or our other partners) if you want to receive them regularly.

It's money to your ears.


Compare Brokers