Best Buy (NYSE:BBY), the largest electronics retailer in the U.S., will announce its fourth quarter and fiscal 2012 results on Thursday, March 29. Last quarter, Best Buy reported lower profits due to restructuring charges related to the closure of its stores in the U.K.
This quarter we are watching for Best Buy’s future growth plan for its online initiatives. Best Buy has been working toward growing its share of the e-commerce market. According to CEO Brian Bunn, e-commerce is one of the fastest-growing businesses for the company. This segment witnessed strong sales growth over the past two quarters, up 13% and 20%, respectively.
See our full analysis for Best Buy
Increasing Competition Squeezing Margins
In Q3 2012, the company’s gross profit witnessed a decline of 2% year-over-year. Like all other retailers, Best Buy undertook heavy promotional activities in order to drive traffic and sales during the holiday season. This could likely affect Best Buy’s gross margins in Q4 as well. A higher proportion of sales of lower margin products could also impact its margins. The company expects its fiscal 2012 gross margin to be down by about 50 basis points (0.5%).
Online Revenues – A Key Focus Area
Online retailers like Amazon (NASDAQ:AMZN) and eBay (NASDAQ:EBAY) enjoy a dominant position in the e-commerce market given their much wider product offerings. Best Buy is rebuilding its internal IT team and plans to hire approximately 200 IT professionals.
Best Buy recently hired Stephen Gillett, the former Starbucks’ (NASDAQ:SBUX) CIO, who played an instrumental role in revamping Starbucks’ online operations. He will be in charge of Best Buy’s digital business, including its online stores. We believe this move is inspired by Best Buy’s plan to increase its market share in the growing e-commerce market.
In the company’s earnings update, we will be watching for Best Buy’s take on the overall consumer electronics market and its future business outlook.
Our price estimate for Best Buy stands at $33, implying a premium of around 25% to the current market price.
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