Electronics retailing giant Best Buy
Yeah, that makes sense.
Actually, in one respect, it does kinda, sorta make sense. Retail analysts and hedgehogs with positions in retailing stocks are so nervous these days, all you need to do is sneak up behind them and yell "boo," and they'll jump straight out of their Allen Edmonds.
So how bad was the quarter? Not too bad, actually. Sales rose more than 10%, and the company posted a 3.3% rise in overall same-store sales. Hot items like MP3 players and flat-panel TVs stayed hot, and not-so-hot items like regular TVs and movies remain cold. Video game sales were also pretty weak, as the introduction of Microsoft's
Gross margins actually improved by more than 100 basis points. Combine that with decent same-store sales, and I think you can argue that the demand/merchandising side of the business is rolling along.
The problem, though, was with expenses. Sales, general, and administrative spending got a little nutty because of higher store-opening costs and costs associated with growing the service side of the business. As a result, operating margin dropped by nearly a full percentage point -- a pretty big jump down when you're talking about low single-digit margins to begin with.
Even with this so-called disappointment, I'm still a big fan of Best Buy. CircuitCity
For my part, the story is the same as it was a quarter ago -- I love the company, but it's not quite cheap enough to fit within my margin of safety rules. Should the freak-out continue, though, the stock could get very interesting in short order.
For more Foolishness:
- Be Ready for Market Stupidity
- Buy What You Really Know
- Beyond Cheap at Best Buy
- Best Buy Almost a Buy
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Fool contributor Stephen Simpson has no financial interest in any stocks mentioned (that means he's neither long nor short the shares).