Recently, electronics retailer Best Buy (NYSE:BBY) has been winning the battle for market dominance, beating peers such as Circuit City (NYSE:CC) and likely being a factor in Tweeter's bankruptcy filing. So while archrivals jeer recent trends, investors are cheering and hoping for another strong quarter when the company releases first-quarter results tomorrow.

What analysts say:

  • Buy, sell, or waffle? Twenty-nine analysts follow Best Buy. Seventeen are bullish, one isn't, and 11 can't make up their minds with a hold rating.
  • Revenue. Analysts are projecting first-quarter sales of $7.85 billion for year-over-year growth of almost 13%.
  • Earnings. Analysts project first-quarter earnings of $0.50 per share, or 6.4% above last year's $0.47.

What management says:
Back in April, when Best Buy released year-end results, it didn't offer quarterly guidance but said it expects fiscal 2008 earnings of $3.10 to $3.25 per diluted share. It's also calling for full-year sales of $39 billion, for year-over-year growth of 9%. This will consist of an estimated 130 new stores, same-store sales growth of 3% to 5%, and a decrease of 30 to 40 basis points in the gross margin.

What management does:
Best Buy posts razor-thin net margins but has proven adept at turning over its inventory and using its size to lean on suppliers and control costs. As a result, returns on invested capital are exceeding 20%, an impressive feat in the cutthroat market of electronics retailing. Better yet, the company has been growing sales and earnings in the double digits for at least five years now.

Margin

11/05

02/06

05/06

08/06

11/06

03/07

Gross

24.6%

25.0%

25.0%

24.9%

24.7%

24.4%

Operating

5.0%

5.8%

6.0%

6.0%

5.9%

6.0%

Net

3.6%

3.7%

3.8%

3.8%

3.7%

3.8%
All data courtesy of Capital IQ, a division of Standard & Poor's. Data reflects trailing-12-month performance for the quarters ended in the named months.

One Fool says:
The electronics industry is riding the popularity of flat-panel televisions, as are other retailers such as Wal-Mart (NYSE:WMT), Costco (NASDAQ:COST), and Sears Holdings (NASDAQ:SHLD). However, most are using the demand to drive foot traffic as plasma and LCD TV prices plummet, while suppliers quickly ramp up production to compete for market share.

Circuit City and smaller industry players appear to be getting clobbered by current industry dynamics. Meanwhile, the strong get stronger, and Best Buy recently announced it was teaming up with Apple (NASDAQ:AAPL) to offer Apple store-in-stores and capitalize on strong consumer demand for iPods and the hype for soon-to-be-released iPhones.

Electronics retailing is notorious for volatility because new product hype results in rapid sales increases that slowly wane as market demand is satiated. Best Buy believes it can sustain its momentum for at least the foreseeable future; tomorrow's results will offer more details into just how long this party will last.

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Best Buy and Costco are Motley Fool Stock Advisor recommendations, while Wal-Mart is an Inside Value recommendation. Try any of our Fool newsletters free for 30 days.

Fool contributor Ryan Fuhrmann has no financial interest in any company mentioned. Feel free to email him with feedback or to discuss any companies mentioned further. The Fool has an ironclad disclosure policy.