Best Buy (BBY 77.09, -4.57) is on track to begin lower by
5.6%, as cautious guidance for the third quarter overshadows strong second
quarter results and upbeat guidance for the fiscal year.
The electronics retailer reported above-consensus second quarter earnings of $0.91/share on a 4.6% year/year increase in revenue to $9.38 bln, which was also ahead of expectations.
The company issued below-consensus earnings guidance for the third quarter, expecting earnings between $0.79/share and $0.84/share. However, Best Buy's expectations for third quarter revenue between $9.4 bln and $9.5 bln are in-line with market estimates. Furthermore, Best Buy expects a strong finish to the fiscal year, having raised its earnings guidance for the fiscal year to between $4.95/share and $5.10/share (from $4.80-$5.00). The company expects that revenue for the fiscal year will be between $42.3 bln and $42.7 bln, which is ahead of market expectations and above Best Buy's previous guidance for sales between $41.0 bln and $42.0 bln.
Chief Executive Officer Corie Barry said the company expects that non-GAAP operating income will hit 4.5% of revenue for the fiscal year, which would be in-line with results from fiscal 2018.
Returning to second quarter results, Best Buy's domestic revenue grew 4.4% to $8.64 bln while domestic comparable sales increased 6.0% after growing 5.4% one year ago. Sales growth was driven by areas like home theater, computing, appliances, gaming, mobile phones, and smart home. The gains were partially offset by lower sales of digital imaging products and tablets. Domestic online revenue grew 10.1% to $1.21 bln. Online revenue made up 14.0% of total domestic revenue, up from 13.2% one year ago. Domestic gross margin declined to 23.8% from 24.0% due to higher supply chain costs and the rollout of Total Tech Support.
International sales increased 10.8% to $740 mln while international comparable sales grew 7.6%. The growth was supported by sales from six new stores opened in Mexico over the past year. International gross margin declined to 23.1% from 25.1% due to lower margins in Canada.
Enterprise comparable sales grew 6.2% after increasing 5.4% one year ago.
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