What To Expect From Best Buy’s Q4 Results?

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Best Buy (NYSE:BBY) is scheduled to announce its fourth quarter results on Wednesday, March 1. The company reported stronger-than-expected results in the third quarter, as both its revenue and earnings came in ahead of market expectations. The retailer’s enterprise revenue grew 1.4% year-over-year (y-o-y) to $9 billion, primarily due strong performances in both its domestic and international segments. An increase in gross margins in both segments, along with lower than expected selling and general administrative (SG&A) expenses in Best Buy’s domestic business, helped the company post adjusted earnings of $0.62 per share for the third quarter, up by more than 50% over the last year. Below we discuss what to watch for in the Q4 earnings release.

Holiday Season

Excluding gas, total retail and food services sales for the 2016 holiday season were up 3.9% y-o-y, while holiday spending in non-store retailers jumped 12.8% y-o-y. [1] This signifies that e-commerce drove the majority of the year’s holiday sales gains. Interestingly, Best Buy significantly grew its e-commerce market share from 3.5% in 2015 to 3.9% in 2016 during the holiday season. [2] The retailer likely benefited from solid demand for Apple’s newer products (Apple Watch and MacBook). We expect Best Buy’s top line to benefit from the company’s holiday sales gains in the upcoming quarter.

Q4 Guidance

For the fourth quarter, Best Buy expects total revenue to be in the range of $13.4-$13.6 billion. It also expects its domestic comparable sales growth in the range of -1% to 1% and international comparable sales growth in the range of -2% to 2%, which in turn would translate to adjusted earnings per diluted share of $1.62 to $1.67 for the company. Reuters’ compiled analyst estimates forecast revenues of $13.6 billion and earnings of $1.67 per share for Q4 FY 2017.

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Notes:
  1. U.S. Census Bureau, Jan 18 2017 []
  2. Two Extra Shopping Days Make 2016 The Biggest Holiday Yet, Slice Intelligence, Jan 2017 []