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BBY Provides 3Q Outlook

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Best Buy Inc. (BBY - Free Report) – multinational specialty retailer of consumer electronics, home office products, entertainment software, appliances and related services – recently released an update on the third quarter of 2013 (ending on November 3, 2012).

Best Buy expects comparable-store sales to drop at the rate similar to the last two quarters of fiscal 2013. Comparable-store sales declined at a rate of 5.3% and 3.2% in the first and second quarter of fiscal 2013, respectively. Moreover, gross profit is anticipated to fall at the rate similar to that of second quarter of fiscal 2013, whereas gross margin is forecasted to contract above 100 basis points compared with the prior-year quarter.

Best Buy believes that the contraction in gross margin will take place mainly due to negative impact of product mix and product transitions arising from new product launches. Further, selling, general and administrative expenses are expected to rise in low-single digits attributable to investments made by the company to enhance customer services and relations.

Owing to the above-estimated trimmed outlook for the third quarter of fiscal 2013 by the company, management anticipates a substantial decline in its earnings compared with its prior-year quarter.

Additionally, Best Buy has also made few structural changes to its leadership organization, with a view to smoothen its business operations. Shawn Score has been appointed to lead the U.S. retail operations, whereas Jude Buckley will now lead Connectivity Business group.

Further, The President of Best Buy’s U.S. business Mike Vitelli, is supposed to leave as the company exits fiscal 2013, whereas Executive Vice President of the U.S. operations, Tim Sheehan, will resign towards the end of the ongoing month. CEO and President of the company, Hubert Joly, will work closely with Vitelli to ensure proper running of the operations.

The company will hold an Analyst and Investor Day on November 1, 2012 in New York City. Further, Best Buy is expected to announce its third quarter 2013 financial results on Tuesday, November 20, 2012.

Currently, we have a long-term Underperform recommendation on the stock based on the declining sales at the company’s key categories. However, Best Buy, which competes with Wal-Mart Stores Inc. (WMT - Free Report) , holds a Zacks #3 Rank that translates into a short-term Hold rating.

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