Best Buy lowered its third-quarter guidance due to economic uncertainty and tariffs on Chinese goods.
This week, Best Buy became the latest company to fall victim to fears over the ongoing trade war. The company released its second-quarter earnings report this week and overall, the results were pretty good.
The company improved its bottom line by more than 18% year over year. Earnings beat the Zacks Consensus Estimate and increased 3.5% from a year earlier.
The company even raised its earnings guidance for fiscal year 2020. But Best Buy executives lowered the company’s third-quarter sales guidance due to concerns over tariffs.
And the company’s full-year guidance wasn’t quite as high as investors had hoped for. Here’s an overview of the earnings report and what to can expect from Best Buy going forward.
What Happened During the Second Quarter?
During the second quarter, Best Buy beat earnings forecasts, grew its revenue, and improved its margins. Revenue reached $9.54 billion, just slightly missing forecasts by $10 million. Non-GAAP earnings were $1.08 per share which beat investor expectations by 9 cents.
During the second quarter, electronics and services were the two main sales drivers for Best Buy. In the U.S., comparable sales grew by 1.9%, mostly thanks to an increased demand for headphones, tablets, and appliances.
The demand for these products was so strong, it was able to offset declining sales in gaming and home theatre. All in all, domestic sales grew by 2.1% from a year earlier.
Best Buy’s international sales did lag a bit, mostly due to the negative impact of foreign currency. And the company’s comparable sales in Canada declined by 1.9%.
Overall, it wasn’t a bad earnings report by any stretch of the imagination. But right now, Wall Street is sensitive to any indication that a business might be vulnerable to the trade war, so the company’s shares fell as a result. However, shares of Best Buy did rebound slightly on Friday morning.
Final Thoughts
The most recent earnings report was the first one given under new CEO Corie Bailey. In June, Bailey was promoted to replace former CEO Hubert Joly. Joly led Best Buy through a successful turnaround over the past seven years. The company’s shares saw significant gains in that period — to the tune of more than 240%.
The sentiment regarding Best Buy is likely due to a combination of things. Tariff concerns loom with uncertainty, and there’s also the issue of the company having a new CEO at the helm.
Of the nine analysts who made recommendations regarding Best Buy over the last three months, only two gave the stock a buy rating. The other seven gave it a hold rating. The average price target is $72.75, which represents a 13% upside.
It seems the company has no plans of throwing in the towel any time soon, though. Best Buy has a lot of good plans in the works. For instance, Best Buy recently announced that it’s expanding its partnership with Apple. Apple customers can now have their devices repaired at any of Best Buy’s locations.
