Best Buy Smashes Earnings Expectations, Jumps 13 Percent

Jacob Harper |

Best Buy Co. Inc. (BBY) , one of the best-performing stocks on the market this year, continued their impressive turnaround with a quarterly earnings report that far exceeded expectations.

The electronics big-box retailer had been hurt significantly in 2012 by the ongoing shift to digital media and the growth of e-commerce retailers like Amazon.com Inc. (AMZN) . Best Buy approached the problem by cutting costs across the board, and significantly shrinking the amount of floor space devoted to CDs and DVDs, which used to account for almost 20 percent of the sales floor, to higher-priced, more popular items like smartphone and tablets.

Coupled with the shift away from physical media, the company also renewed focus on better training employees. While Best Buy has a hard time adequately competing with Amazon’s selection, they can seriously challenge them in quality of customer service.



Best Buy also rolled out a price-matching strategy that also undercuts Amazon. While the strategy certainly affected Best Buy’s bottom line, the 30-point basis decline was not as severe as Wall Street analysts had expected.

Concerning their direct competition with Amazon over the electronic retail market, Best Buy posted significant gains in their online business.  Sales in that division increased over 10 percent to hit $477 million in the quarter, or 5.12 percent of total revenue.

This point sparked analysts' optimism over the retailer’s chances against Amazon. Belus Capital Advisor Brian Sozzi wrote, "Best Buy's entirely new website won't launch until 2014, leading me to believe that price matching, and advertising of price matching, is closing the price perception gap with Amazon."

For their second quarter 2013 earnings report, Best Buy reported a net profit of $266 million after write-downs, or $0.32 per share, versus the net profit of $12 million, or $0.04 per share, from the same period a year ago. Revenue for the quarter was $9.3 billion, as compared to $9.34 billion from the previous year. Analysts were expecting a profit of $0.12 per share on revenues of $9.13 billion.

Best Buy is up 13.18 percent to hit $34.78 a share. They're up a whopping 160.20 percent on the year.

DISCLOSURE: The views and opinions expressed in this article are those of the authors, and do not represent the views of equities.com. Readers should not consider statements made by the author as formal recommendations and should consult their financial advisor before making any investment decisions. To read our full disclosure, please go to: http://www.equities.com/disclaimer

Companies

Symbol Name Price Change % Volume
AMZN Amazon.com Inc. 817.88 9.55 1.18 2,661,575
BBY Best Buy Co. Inc. 43.54 0.18 0.42 2,494,996
HTCTF Hutchison Telecommunications Hong Kong Holdings Lt 0.33 0.00 0.00 0

Comments

Emerging Growth

Pressure Biosciences Inc

Pressure BioSciences Inc is a biological life sciences research company. It is engaged in the development and commercialization of a platform technology called pressure cycling technology.

Private Markets

Santo Diablo Mezcal

Santo Diablo Mezcal has been created to capitalize on a boom sector of the beverage market currently full of many small unmemorable products by producing one sexy, household, easily recognizable…

GoCoin

Blockchain currencies (e.g. Bitcoin) provide a new disruptive way to transfer value between parties over the internet as opposed to going through banks. GoCoin provides online merchants with a suite…