As we break into the winter shopping season, early data is
showing positive year-over-year (YOY) trends that could put
retailers in the holiday spirit. A National Retail Federation
survey quoted by The Wall Street Journal cited an 8.7% YOY jump in
online and store traffic to 212 million shoppers during the period
between Thanksgiving and Sunday. Furthermore, average spend
estimates showed a 6.4% YOY increase to $365.34.
Best Buy competes with other major retailers including Wal-Mart
) and Costco (
), which carry a broader product line.
We currently have a Trefis price estimate of $40.88
for Best Buy's stock
, slightly below the current market price of $43.60.
The percentage of shoppers purchasing electronics reportedly
remained flat, meaning specialty electronics retailers like Best
Buy are taking a corresponding share in the sales growth. This
could help to solidify Best Buy's share of the holiday shopping pie
leading into the premier consumer discretionary spending
The early data is just the tip of the iceberg, however, with the
next big spotlight to emerge in Cyber Monday sales. While the early
data establishes optimism, retail data through Cyber Monday could
point towards a more notable revenue trend for electronics
comScore estimates suggest Cyber Monday online sales between
$900 million and $1 billion this year, a nice increase off of $887
million in 2009.
Best Buy remains one of the most visited retail sites and would
likely benefit from any upside surprise in Cyber Monday sales. The
impact of this affect could boost Best Buy's domestic revenue per
square foot, for which we currently estimate a CAGR of 2% (to
$969,000) between fiscal year 2010 and 2013. Upside to our estimate
could provide a boost to Best Buy stock, as we currently estimate a
roughly 0.8% sensitivity to a 1% change in domestic revenue per
Revenue Per Square Foot
US store sales currently represent roughly 73% of our $40.88
Best Buy price estimate, with our price estimate showing a roughly
0.8% sensitivity to a 1% change in domestic revenue per square
foot. You can drag the trend-line in the chart above to create your
own revenue per square foot forecast for Best Buy and see how this
impacts the company's stock.
The early holiday season retail data should comfort investors if
consumer spending trends continue to improve, although we will
monitor the pricing trends on promotional activities as this could
impact gross profit margins.
We anticipate further details regarding Best Buy's Black Friday
and Cyber Monday results to be provided during the company's fiscal
year Q3 2011 earnings call on December 14.
complete analysis for Best Buy's stock is here