The electronics giant reported that net income increased 60.8%, to $254 million, or $0.60 per share. Gross margin increased to 25.7% of sales from 24.4% this time last year, demonstrating the company's pricing power. Investors should also note that a less onerous tax rate helped boost Best Buy's earnings. Revenue increased 3%, to $11.3 billion.
Best Buy's silver linings do come with a few clouds, though. Take Best Buy's same-store sales. Overall comps slipped 0.1%, which was attributed to a decline in customer traffic here in the U.S., although an increase in average ticket partially offset that weakness. On a more cheerful note, Best Buy's international comps continue to rock, with a 4% increase in that segment's comps, including a 20% surge in China.
While Best Buy has been able to boost domestic market-share gains lately, this quarter it reported a 50-basis-point drop in that metric. "Constrained inventory" during the initial launch of Apple's
Back to the good news: Best Buy increased its annual earnings guidance by $0.10 per share, to $3.55-$3.70 per share, and anticipates a 5% increase in revenue and 1% to 2% increase in same-store sales.
The outlook for consumer spending remains sketchy, but Best Buy competes admirably with gigantic rivals like Wal-Mart
Best Buy's quarterly results drove investor euphoria today, which is quite a reversal from the reaction to its results last quarter. Long-term investors should feel gratified to have this stock in their portfolios, regardless of quarter-by-quarter fluctuations in sentiment. Given its leadership in its retail niche, and the fact that it's trading at just 10 times this year's earnings (even cheaper than stocks like Wal-Mart and Target), Best Buy's still a good long-term buy for investors.