We maintain our bearish stance on
Best Buy Company Inc.
), the beleaguered consumer electronic retailer, with a price
target of $10.00, following its dismal third-quarter 2013
Best Buy posted weaker-than-expected results. The quarterly
earnings came in at 3 cents per share, plummeting 94% from 47
cents earned in the year-ago quarter, and missing the Zacks
Consensus Estimate of 12 cents by miles.
Thus, this slide in earnings challenges Hubert Joly, the newly
appointed Chief Executive Officer, with the Herculean task of
completely revamping the operations. Best Buy, had announced the
suspension of its future share buyback program in the second
quarter and refrained from providing earnings projection for
fiscal 2013 due to the uncertain economic environment related to
product launches and industry wide sales.
Best Buy's total revenue dropped 3.5% year over year to
$10,753 million but came ahead of the Zacks Consensus Estimate of
$10,730 million. Comparable-store sales fell 4.3% compared with a
decline of 0.7% in the year-ago period. The company has long been
struggling with dwindling sales in key categories including
televisions, notebooks, digital imaging and gaming devices, which
in turn, is taking a toll on the company's same-store sales
Moreover, heightened competition from online retailers like
), is adversely affecting its sales and profitability as the
online retailers are gradually encompassing new merchandise
categories under their purview and offering huge discounts on
products with free shipping services to attract customers.
We also remained concerned about the tough economic
environment in China and weak sales in Canada. Further, Best
Buy's cash position plunged 85.1% year over year to $309 million
at the end of the third quarter, which is of grave concern.
The Zacks Consensus Estimates have been declining since Best
Buy reported disappointing results. For fiscal 2013 and 2014, the
Zacks Consensus Estimates has fallen 11 cents and 3 cents to
$2.70 and $2.65, respectively in the last 7 days.
The above analysis supports our unbiased view, and advocates
our "Underperform" recommendation on the stock. Best Buy, which
faces competition from
Wal-Mart Stores Inc.
), holds a Zacks #5 Rank (short-term Strong Sell).
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