There's nothing like "better-than-expected" news to boost a stock these days, I guess. Best Buy's (NYSE:BBY) shares are surging today after the electronics retailer reported quarterly results that were better than Wall Street anticipated.
Best Buy's fourth-quarter net income dropped 23% to $570 million, or $1.35 per share. This decrease included $144 million in restructuring and impairment charges; without the charges, net income still would have dropped 6%.
Revenue ticked up nearly 10% to $14.7 billion, but same-store sales fell 4.9%, compared to a modest 0.2% decline in the same period last year. In an interesting note, Best Buy was able to improve gross margin to 24.6%, compared to 23.7% this time last year.
In addition, Best Buy said that in 2010, it expects earnings to come in between $2.50 to $2.90 per share, which is a better forecast than analysts expected.
One of the things that's helping Best Buy is the disappearance of major rival Circuit City. The company pointed out in its press announcement that it was still able to compete pretty handily even with liquidation sales going on. Best Buy also said its market share has improved by 1.2% to nearly 22%.
I've long thought Best Buy was a reasonable stock idea, due to its history of being an innovative business in retail. I'm not convinced that less nimble electronics rivals like RadioShack (NYSE:RSH) are going to be able to hack it in the rough consumer climate. However, it's true that Best Buy still has discounters like Costco (NASDAQ:COST), Wal-Mart (NYSE:WMT), and Target (NYSE:TGT) to contend with.
Also true is the fact that the economy is in bad shape (and I do fear it will get worse before it gets better), and of course the economic headwinds are going to make it much harder for any company that peddles consumer electronics. With many consumers retrenching -- or simply overleveraged and unable to buy any more on debt -- the old feeding frenzies on nice-to-have luxury items like flat-screen TVs don't seem destined to return for quite some time.
The retail space is in survival-of-the-fittest mode these days, but given Best Buy's history of customer-centric innovation and a solid brand, I think it's better positioned to survive than many others. (After all, I think it's arguable that Circuit City dropped the ball on customer service, and buying electronics at the discounters pretty much requires knowing exactly what you're looking for, and usually involves a relatively limited selection.)
Best Buy's obviously not without risk in these tough economic times, but I continue to believe that it's one of the stronger stocks on the retail landscape.
Shop around for some related Foolishness:
- Not all Fools like Best Buy -- Christopher Barker nominated it as the Worst Stock for 2009.
- It was a blue Christmas at Best Buy.
- In November, nobody was buying.
