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Best Buy's (BBY) Q1 Earnings Surpass Estimates, View Intact

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Best Buy Company, Inc. (BBY - Free Report) started fiscal 2019 on an upbeat note, with both the top and the bottom line not only surpassing the Zacks Consensus Estimate for the second straight quarter but also growing year over year.

This consumer electronics retailer posted first-quarter adjusted earnings per share of 82 cents, surpassing the Zacks Consensus Estimate of 75 cents. Moreover, the bottom line improved 36.7% year over year, which boosted investors’ confidence.

The top line increased nearly 6.8% year over year to $9,109 million and beat the consensus mark of $8,785 million. Enterprise comparable-store sales (comps) were up 7.1% compared with 1.6% in the prior-year quarter.

Best Buy Co., Inc. Price, Consensus and EPS Surprise

 

Best Buy Co., Inc. Price, Consensus and EPS Surprise | Best Buy Co., Inc. Quote

Moreover, this Zacks Rank #2 (Buy) stock rallied nearly 5.4% in the past three months, outperforming the industry’s growth of 0.1%.

Adjusted operating profit came in at $302 million, up 0.7% year over year. However, adjusted operating margin contracted 20 basis points (bps) to 3.3%.

Segment Details

Domestic segment revenues rose 6.3% year over year to $8,412 million, primarily owing to a 7.1% increase in comparable sales. This was partially offset by a revenue loss stemming from the shutdown of 17 large-format and 193 Best Buy Mobile stores over the past year.

Domestic comparable-online sales grew 12% to $1.14 billion on an increase in average order value and conversion rates.

The segment’s gross profit rose 4.9% to $1,962 million, while adjusted gross margin came in at 23.3%, down 30 bps year over year. Adjusted operating income rose 1.7% to $303 million. However, adjusted operating income margin contracted 20 bps to 3.6%.

International segment revenues climbed 13.1% to $697 million, primarily on the back of a 6.4% rise in comparable sales growth in Canada and Mexico, and a favorable foreign currency impact of 500 bps.

The segment’s gross profit grew 7.9% to $163 million in the reported quarter but adjusted gross margin contracted 110 bps to 23.4%. Adjusted operating loss came in at $1 million, down from adjusted operating profit of $2 million in the year-ago quarter.

Other Financial Details

Best Buy ended first-quarter fiscal 2019 with cash and cash equivalents of $1,848 million, long-term debt of $792 million and total equity of $3,420 million. In the fiscal first quarter, the company returned about $528 million to shareholders via buybacks of $400 million and dividends of $128 million. Moreover, it declared to buy back $1.5 billion of shares during fiscal 2019.

Guidance

Best Buy provided an encouraging view for the second quarter and fiscal 2019. For fiscal 2019, management forecasts Enterprise revenues of $41-42 billion, with comps growth of nearly flat to up 2%. The company anticipates adjusted operating income rate of about 4.5%, flat with the fiscal 2018 level. Meanwhile, the company expects an effective tax rate of 25% and earnings per share in the range of $4.80-$5.00, reflecting growth of about 9-13% from fiscal 2018. The Zacks Consensus Estimate for fiscal 2019 is pegged at $4.98.

For the second quarter, management anticipates Enterprise revenues between $9.1 billion and $9.2 billion and comparable sales increase of 3-4%. Management projects adjusted earnings in the band of 77-82 cents a share, reflecting an increase of 12-19% year over year. The Zacks Consensus Estimate is in line with the high end of the company’s guided range.
    
Also, in the fiscal second quarter, the company expects domestic comparable sales growth of 3-4%, while international comparable sales are estimated in the band of 1-4%.

Interested in the Retail Space? Check These

Urban Outfitters, Inc. (URBN - Free Report) delivered an average positive earnings surprise of 19.8% in the trailing four quarters. It has a long-term earnings growth rate of 12% and carries a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Fossil Group (FOSL - Free Report) has an average positive earnings surprise of 54.1% for the last four quarters. The stock carries a Zacks Rank #2.

Target Corporation (TGT - Free Report) has a long-term earnings growth rate of 5.2% and a Zacks Rank #2.

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