Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis.
What: Shares of Best Buy (NYSE:BBY) finished down 11% today after its holiday-quarter outlook left the market wanting.
So what: The big-box electronics retailer actually delivered a solid third quarter with adjusted earnings per share of $0.18, against analysts' estimate of $0.11. Revenue was flat, but met estimates, while same-store sales, which include the online channel, crept up 0.3%, growing 1.7% at domestic locations. It appears that some of the company's "Renew Blue" strategies, including cost-cutting and partnering with vendors such as Samsung to set up kiosks, are paying off. However, the retail chain warned that the holiday season would be tough, as it expects an especially competitive shopping period that would put pressure on margins. Best Buy will open at 6 p.m. on Thanksgiving for Black Friday deals, staying open overnight.
Now what: Today's sell-off seemed to come as much from shares being bid up so high lately as from any material warning about holiday sales. A number of retailers have played down expectations for the all-important Christmas season, but the economy is still stronger than it's been at any time since 2007. I'd be more concerned about Best Buy on a valuation standpoint than for near-term margin concerns. Shares have more than tripled in the past year, and the company still faces strong secular headwinds, such as the continued growth of Amazon.com. The holiday quarter is a make-or-break time for Best Buy, so coming up short could ruin what's been an otherwise outstanding year.