Best Buy (BBY
70.31, -5.64, -7.43%) is down pre-market despite reporting better than expected
The electronics retailer reported above-consensus first quarter earnings of $0.82/share on a 6.8% year/year increase in revenue to $9.11 bln, which was also ahead of expectations.
During the company's conference call, an analyst asked if there was anything specific that stopped Best Buy from raising its guidance. In response, company management noted that while revenue is expected to be on the high end of the guidance range, it is too early to raise guidance for the remainder of the fiscal year.
Domestic comparable sales increased 7.1%, well ahead of the company's guidance for comparable sales growth between 1.5% and 2.5%. Domestic comparable online sales grew 12.0% while International comparable sales increased 6.4%.
Domestic comparable sales growth was fueled by mobile phones, appliances, computing, tablets, and "smart" home devices. Domestic online comparable sales growth resulted from higher average order values and higher conversion rates. Online revenue made up 13.6% of domestic revenue, up from 12.9% one year ago.
Domestic gross margin declined to 23.3% from 23.6% due to rate pressure in the mobile phones category and proceeds from a legal settlement recorded one year ago.
International revenue grew 13.1% to $697 mln thanks to strong comparable sales growth (+6.4%) and positive impact from foreign exchange translations. International gross margin weakened to 23.4% from 25.4% due to lower gross profit in Canada, which resulted from lower sales of the higher-margin services category and the launch of a tech support service in Canada.
Looking ahead, Best Buy expects that earnings for the second quarter will be between $0.77/share and $0.82/share on revenue between $9.10 bln and $9.20 bln. Comparable sales are expected to increase between 3.0% and 4.0% during the second quarter.
Best Buy reaffirmed its guidance for the fiscal year, expecting earnings between $4.80/ share and $5.00/ share on revenue between $41.00 bln and $42.00 bln. Comparable sales are expected to increase up to 2.0% during the fiscal year.
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