Best Buy Co Inc. gave fiscal first-quarter and full-year guidance on Thursday that takes into account the coronavirus epidemic’s impact on the consumer electronics retailer’s supply chain.
Best Buy BBY, -4.35% forecasts that most of the impact from the coronavirus will happen during the first half of the year.
“Therefore, we view this as a relatively short-term disruption that does not impact our long-term strategy and initiatives,” said Best Buy Chief Financial Officer Matt Bilunas in a statement.
For fiscal first quarter, Best Buy expects enterprise revenue of $9.1 billion to $9.2 billion, same-store sales growth of flat to up 1% and adjusted EPS of $1.00 to $1.05. FactSet is guiding for revenue of $9.27 billion, same-store sales growth of 1.8% and EPS $1.01.
For the year, Best Buy expects revenue of $43.3 billion, to $44.3 billion, same-store sales growth of flat to 2% and adjusted EPS of $6.10 to $6.30. The FactSet guidance is for revenue of $44.2 billion, same-store sales growth of 1.6% and EPS of $6.26.
“There are some supply chain-related issues as a result of coronavirus,” Bilunas said on the earnings call, according to a FactSet transcript. “So on the low end of our guide, we would assume that there’s a material supply chain disruption from that and that we can’t make it all up in the year.”
Even taking the virus outbreak into account, Best Buy Chief Executive Corie Barry says that “trying to size perfectly the coronavirus impact at this point is incredibly difficult.”
Manufacturers and suppliers are on the lookout for complications throughout the flow of merchandise.
“Even if a product isn’t finalized in Asia, some people are waiting for complications that may flow from there,” Barry said. “There are varying levels of safety stock across the industry, and global vendors have varying levels of global inventory. And then obviously estimating the transportation situation once the produce comes back is also difficult.”
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Best Buy reported fourth quarter earnings and revenue that beat expectations. Raymond James analysts say the results show that the company is creating the right mix of products and services.
“This coincides with our thesis that the company’s holistic approach in offering premium consumer electronics, tech services, and healthcare solutions will lead to a more dependable, and higher margin revenue stream in the coming years,” wrote analysts led by Matthew McClintock.
Raymond James rates Best Buy stock strong buy.
Best Buy’s results also show that the retailer was able to withstand the pricing and swift delivery pressure from the competition.
“Pricing discipline was maintained despite an intensely promotional environment, particularly from Walmart and Amazon as both utilized price and shipping promotions to drive sales, with Best Buy able to hold the line on margins despite a drop in gross profit as expenses were leveraged,” said Charlie O’Shea, Moody’s lead Best Buy analyst.
Best Buy also benefitted from a shift in holiday wish lists among younger consumers who prefer electronics like headphones over toys. This is “a factor that also had a detrimental impact on toy sales,” said Neil Saunders, managing director at GlobalData Retail.
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And appliances, a strong category for Home Depot Inc. HD, -4.27% , was a strong category for Best Buy as well.
“Best Buy continues to win share in this category, both thanks to the strength of its assortment and because of the drop out and pull back of other players such as Sears and J.C. Penney,” Saunders said.
Best Buy stock slipped 4.7% in Thursday trading, but is up 9.2% over the last year. The S&P 500 index SPX, -3.23% has gained 3.4% for the last 12 months.
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