Tuesday, June 19, 2007

Best Buy (BBY) Preview

Best Buy (BBY) reports today, what should we expect? If we believe management, they predict fiscal 2008 earnings of $3.10 to $3.25 per diluted share on full-year sales of $39 billion (9% growth). Broken down, it will consist of an approximately 130 new stores and same-store sales growth of 3% to 5%.

For the current quarter, Q1 for 2008, the street is looking at 50 cents a share vs the 47 they posted last year. Been in a Best Buy lately? Still full of people, still busy and I see no reason they should not beat the expectations. With competition like Circuit City (CC) and Tweeter (who is now in bankruptcy) falling by the wayside so fast you would swear they were racing to get there, Best Buy clearly is the king of the hill.

The only serious competition for shopper's value left is Costco (COST), Wal-Mart (WMT) and Sears (SHLD) but even they cannot hold a candle to Best Buy in term of selection. Best Buy is in a field of one here now. With the recent announcement that they will provide Apple (AAPL) a "store in store" concept soon, this gap only looks to widen.

Best Buy's earnings become more important each quarter because if they are not doing well, the entire consumer electronics space is suffering. A word of caution, since they do not issue quarterly guidance, if they do miss, pay close attention to what they say for the rest of the year. If they miss and guide inline for the remainder of the year, don't worry, it was the analyst who missed, not them.

Should they miss and guide lower? Watch for blood in the retail street today.

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