Best Buy (BBY) shares are surging after the company beat estimates on the top and bottom line for the fifth straight quarter. Best Buy has reported positive comparable store sales eight quarters in a row.
While much of the retail sector continues to deal with soft traffic and increasing competition, Best Buy is thriving (relatively).
Chief Executive Hubert Joly has done an exceptional job at the helm of the nation's largest electronics retailer. He took the reins in 2012 and installed the Renew Blue transformation. Initiatives included price competitiveness, significant investments online and improving the customer experience with vendor partnerships and enhanced service offerings. Offering price parity with the likes of Wal-Mart (WMT), Costco (COST) and Amazon (AMZN) while differentiating itself is the best place to buy electronics has resulted in consistent market share gains.
Best Buy expects to continue taking market share in the consumer electronics industry this year.
The company reported fourth quarter EPS up 12%, above guidance. Comparable store sales grew 3%, at the high end of its forecast, on top of 9% growth last year. Comp sales grew in each segment, led by wearables, appliances, smart home and gaming, offset by declines in the mobile category.
Analysts had feared that increased distribution of Apple (AAPL) products at Costco and Amazon would hurt sales. However, if you follow Apple, you know that declines in the mobile category were a function of their business: smartphone saturation and an extended replacement cycle, which is not a Best Buy specific issue. Best Buy showed it is not entirely dependent on Apple products.
Earnings guidance for the first quarter and fiscal 2020 were mostly above consensus. Best Buy guided for fiscal 2020 EPS up 4% at the midpoint with comp sales up 0.5-2.5%. Management's guidance tends to prove conservative.
The company guided for flat gross and operating income margins, but up to $1 billion in share repurchases, which will help boost EPS.
Best Buy impressively achieved its 2021 adjusted profit and revenue targets laid out in 2017 two years in advance. The company will host another Investor Day during the third quarter this year.
Meanwhile, the stock has a respectable dividend yield of 2.8% after raising its payout by 11% this morning.
With a $19 billion valuation, Best Buy trades at just over 12x EPS and 6x EV/EBITDA. That represents discount to the average retailer at 16x and 8x, respectively.