What happened

Shares of Best Buy (BBY 2.69%) pulled back Friday as concerns about the coronavirus impact overwhelmed an otherwise strong fourth-quarter earnings report.

The stock was down as much as 6.3% during the trading session but closed down 3.4% as the market surged in the last 20 minutes.

Two customers at Best Buy looking at phones

Image source: Best Buy.

So what

In the key holiday quarter, Best Buy said comparable-store sales rose 3.2%, driving overall revenue up 2.7% to $15.2 billion, beating estimates at $15.05 billion.  

Gross margin in the quarter fell from 22.2% to 21.3% due to a shift to lower-margin products and as it absorbed the impact of tariffs on goods from China. But the electronics retailer saved on overhead costs due to lower bonuses. Though operating income fell slightly in the quarter, the company benefited from a lower tax rate and share buybacks, and adjusted earnings per share rose from $2.72 to $2.90, well ahead of expectations at $2.75.

Touting the company's 12th straight quarter of comps growth, CEO Corie Barry said, "We offered compelling holiday deals that resonated with customers and provided a seamless shopping experience, great inventory availability, and fast and free delivery."

Now what

Despite the strong fourth-quarter performance, investors were rattled by the company's guidance and management comments on the coronavirus.

CFO Matt Bilunas said:

As we enter FY21, we are closely monitoring the developments related to the coronavirus outbreak. This is a very fluid situation, which makes it difficult to determine exact financial impacts from disruptions in supply chain. Based on what we know today, we have assumed the majority of the impacts occur in the first half of the year.

Best Buy's guidance, which includes its best estimate of the coronavirus impact, calls for comps growth of flat to 1% for the first quarter and revenue of $9.1 billion to $9.2 billion, slightly below estimates at $9.23 billion. It expects EPS of $1.00 to $1.05, versus estimates of $1.00. For the full year, it sees EPS of $6.10 to $6.30, slightly below the consensus at $6.26. And on the top line, it expect comps growth of flat to 2% and revenue of $43.3 billion to $44.3 billion, which compares to estimates at $44.2 billion.

Today's sell-off is a bit surprising considering the strong results and guidance that's more or less in line with expectations, but investors are still clearly jittery about the potential impact of the coronavirus.