How many more GPS Will Best Buy Sell in 2006?
Best Buy Sees Higher Earnings, Sales Growth
A WALL STREET JOURNAL ONLINE NEWS ROUNDUP
February 9, 2006 2:15 p.m.
Best Buy Co., the nation's biggest consumer electronics chain, raised its fourth-quarter earnings and sales outlook, citing gift card spending and better expense control. Shares rallied nearly 8% in early trading.
For the quarter ending Feb. 25, Best Buy projected earnings from continuing operations of $1.25 to $1.30 a share, up from an earlier forecast of $1.06 to $1.16 a share. A year ago, the retailer reported adjusted earnings from continuing operations of $1.04 a share.
The Minneapolis-based retailer cited tighter expense controls as well as strong sales of flat-panel TVs, MP3 players, notebook computers and videogames as well as an increase of about 20% in gift cards issued.
"The strong revenue momentum we saw in December accelerated through January," said Chief Financial Officer Darren Jackson.
Sales in stores open at least one year -- a closely watched performance gauge called comparable sales -- are expected to increase between 6% to 7% in the fourth quarter, up from a previously forecast 3% to 5% range.
In trading on the New York Stock Exchange, shares of Best Buy gained $3.77, or 7.5%, to $52.60. The stock is approaching its 52-week high of $53.17, which was set July 28.
The magnitude of Best Buy's fourth-quarter earnings upside is a surprise but not what's driving it, Sanford Bernstein analyst Colin McGranahan said. Sales of flat-panel televisions have been accelerating, video gaming as been helped by Microsoft Corp.'s Xbox 360, and sales of MP3 players and deskstops have been strong, he said.
"The overall consumer environment is good," McGranahan said. Best Buy has also clearly tightened its expenses, which is good for its margins, he said.
Higher labor costs during Best Buy's third quarter stemming from the addition of sales associates, personal shopping assistants and other positions led to a lower-than-expected operating margin for the period.
For fiscal 2006, Best Buy expects per-share earnings from continuing operations to increase to a range of $2.24 to $2.29 a share from $1.75 a year earlier. On average, Wall Street expects the company to earn $2.14.
Best Buy also anticipates its first-quarter profit will likely show a fairly modest increase from a year ago. The Street, on average, expects Best Buy's earnings to increase to 38 cents from 34 cents a year earlier.
Additionally, Best Buy plans to open nearly 90 stores in the U.S. and Canada during fiscal 2007. It has more than 930 retail stores. The company estimates the store expansion will create more than 9,000 jobs and it expects to employ more than 140,000 people by the end of fiscal 2007. |
