Best Buy Earnings: Another Layer of Uncertainty to Consider

The following is an excerpt from a report compiled by Michael Pachter of Wedbush Securities.

Best Buy’s (NYSE:BBY) top-line beat came primarily from foreign currency translation gains. Revenue was $16.7 billion, compared with our estimate of $16.5 billion and consensus of $16.3 billion. Domestic revenue was $12.6 billion, in line with our estimate, while international revenue was $4.2 billion, compared with our estimate of $3.8 billion. Domestic online sales increased 11.2% and reached $1.3 billion (10% of total domestic sales). The top-line beat was driven by international, which benefitted from the positive impact of changes in foreign exchange rates.

Better-than-expected gross margin and add-backs drive EPS beat. Non-GAAP EPS was $1.64 (excluding a $2.85/share net charge), compared with our estimate of $1.35, and consensus of $1.53. The EPS beat was driven by better-thanexpected gross margin, as well as significant goodwill and impairment add-backs.

Revising our FY:14 estimates. We are increasing our FY:14 estimate for revenue to $47.8 billion from $47.1 billion to reflect better-than-expected domestic comps driven by price-matching in Q4 and the extension of the price matching policy beginning on March 3, but are lowering our EPS estimate to…