Friday, September 21, 2007

Best Buy's International Exposure Boosts Results

Best Buy (BBY) released results Wednesday and a reoccurring theme popped up in them.

If you do not international exposure in today's world, you are in trouble. We saw it this week with the investment bank as Goldman Sachs (GS) and Lehman (LEH) were able to beat estimates and Morgan Stanley (MS), whose exposure is far less than the other two did not. Now we have the electronics retailers showing this to us as Best Buy (BBY beats while Circuit City (CC) did not. Although, to be honest, Circuit City may have just missed by more if they had more international exposure but that is another story.

Anyway, Best Buy's revenue jumped 15% and earnings 8.7% for the most recent quarter and it was lead by a 54% increase in international results. This enabled Best
Buy to predict it will meet the high end of estimates of $3.15 a share.

Another interesting item was that for the first time they broke out service (The Geek Squad) and that division saw a 5.3% increase. A note here, Best Buy is doing a lousy job of telling people what the Geek's do. Until I saw a 60 minutes piece on them last week, I had no idea of the spectrum of help they provide people. This division could explode for Best Buy if they only better informed people of what they do and how reasonably they do it for. This would work because Best Buy just does not have any competition in this area other than smallerlocal people who just cannot match the scale and scope of services the Geek's offer. It is a hugely underutilized asset.

How important are the Geek's and overseas for Best Buy? If you strip them out then Best Buy sales increased 3.6%.

Another lesson for us on the need to be a player all over the world.

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