Today's stock market
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Real estate was the strongest sector, with the Vanguard REIT ETF (NYSEMKT:VNQ) rising 1.4%. The price of gold slipped, pulling down related stocks; the VanEck Vectors Junior Gold Miners ETF (NYSEMKT:GDXJ) dropped 2.2%.
Best Buy beats expectations but lowers short-term guidance
Best Buy announced second-quarter results that beat expectations but gave guidance for next quarter that missed the analyst consensus forecast, and shares fell 5%. Revenue increased 4.9% to $9.38 billion and non-GAAP earnings per share rose 32% to $0.91. Analysts were expecting non-GAAP EPS of $0.83 on revenue of $9.28 billion.
Comparable sales rose a healthy 6.2%, compared with a 5.4% increase in the period last year. Comparable sales in the U.S. were up 6%, with 1.5 percentage points of that increase due to an extra week in fiscal 2018. International comps climbed 7.6% and domestic online comps were up 10.1%. Revenue didn't keep up with comparable sales because Best Buy closed 292 Best Buy Mobile stores and 17 large-format stores in the last year. Gross profit margin decreased to 23.8% from 24.1% in Q2 last year.
Looking forward, Best Buy raised full-year revenue guidance by 2.4% at the midpoint to a range of $42.3 billion to $42.7 billion and forecast EPS of between $4.95 and $5.10, above the previous guidance of $4.80 to $5.00. What the market apparently didn't like was guidance for Q3 non-GAAP EPS to come in between $0.79 and $0.84, which came in below the analyst consensus of $0.92.
Best Buy's business seems very much on track, and despite the disappointment over the short-term outlook, the stock price merely pulled back to a level last seen only two weeks ago.
Sales are up big at DSW
Shoe retailer DSW surprised investors with a big jump in sales and profit, and shares soared 20.2%. Revenue grew 16.4% to $795 million, compared with the analyst consensus of $689 million. Adjusted earnings per share jumped 66% to $0.63 while Wall Street was expecting only $0.46.
The increase in total sales reflects the benefit of an acquisition in Canada, but excluding that, comparable sales still increased a strong 9.7%, up big from the 0.6% comp gain in last year's second quarter and 2.2% growth in Q1. Gross margin expanded 2.3 percentage points from a year ago to 33.2%, thanks to a hefty increase in merchandise margin.
DSW forecast growth in full-year revenue of between 6% and 9%, and raised 2018 EPS guidance by $0.08 to a range of $1.60 to $1.75. Comparable sales gains for the year should be low- to mid-single digits.
"We are thrilled to report record sales and earnings results this quarter as our merchandise strategy and marketing investment fueled strong customer engagement, traffic and transaction activity, resulting in a 10% comp," said CEO Roger Rawlins in the press release. "The strong results we've had this spring demonstrate we're successfully activating customers and increasing lifetime value."
Investors shared the enthusiasm for the company's results, as DSW appears to be getting traction in a big turnaround.