Best Buy’s Cyber Monday Data Could Lift Outlook
As we break into the winter shopping season, early data is showing positive year-over-year (YOY) trends that could put retailers in the holiday spirit. A National Retail Federation survey quoted by The Wall Street Journal cited an 8.7% YOY jump in online and store traffic to 212 million shoppers during the period between Thanksgiving and Sunday. [1] Furthermore, average spend estimates showed a 6.4% YOY increase to $365.34.
Best Buy competes with other major retailers including Wal-Mart (NYSE:WMT) and Costco (NASDAQ:COST), which carry a broader product line. We currently have a Trefis price estimate of $40.88 for Best Buy’s stock, slightly below the current market price of $43.60.
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The percentage of shoppers purchasing electronics reportedly remained flat, meaning specialty electronics retailers like Best Buy are taking a corresponding share in the sales growth. This could help to solidify Best Buy’s share of the holiday shopping pie leading into the premier consumer discretionary spending season.
The early data is just the tip of the iceberg, however, with the next big spotlight to emerge in Cyber Monday sales. While the early data establishes optimism, retail data through Cyber Monday could point towards a more notable revenue trend for electronics retailers.
comScore estimates suggest Cyber Monday online sales between $900 million and $1 billion this year, a nice increase off of $887 million in 2009. [2]
Best Buy remains one of the most visited retail sites and would likely benefit from any upside surprise in Cyber Monday sales. The impact of this affect could boost Best Buy’s domestic revenue per square foot, for which we currently estimate a CAGR of 2% (to $969,000) between fiscal year 2010 and 2013. Upside to our estimate could provide a boost to Best Buy stock, as we currently estimate a roughly 0.8% sensitivity to a 1% change in domestic revenue per square foot.
Revenue Per Square Foot
US store sales currently represent roughly 73% of our $40.88 Best Buy price estimate, with our price estimate showing a roughly 0.8% sensitivity to a 1% change in domestic revenue per square foot. You can drag the trend-line in the chart above to create your own revenue per square foot forecast for Best Buy and see how this impacts the company’s stock.
The early holiday season retail data should comfort investors if consumer spending trends continue to improve, although we will monitor the pricing trends on promotional activities as this could impact gross profit margins.
We anticipate further details regarding Best Buy’s Black Friday and Cyber Monday results to be provided during the company’s fiscal year Q3 2011 earnings call on December 14.
Our complete analysis for Best Buy’s stock is here.
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