Press "Enter" to skip to content

Best Buy Outlook Far From Robust, Says Analyst

  • Wedbush analyst Seth Basham reiterated a Neutral rating on the shares of Best Buy Co BBY and raised the price target from $80 to $85.
  • Best Buy reported 3Q22 results that were better than the company’s guidance and flowed through the outperformance into updated full-year guidance, said the analyst.
  • Comparable sales decline of 10.4% were ahead of guidance for comparable sales, slightly worse than 2Q22.
  • Basham thinks the company is lapping a period when consumers spent more time in their homes and receiving government stimulus benefits. These consumers currently focus more on value-oriented purchases as they face increasing financial constraints.
  • After August, where Best Buy reported a 10% fall in revenue, experienced sequential improvement in September before sequentially decelerating to 15% decline in October.
  • But sales trends on a three-year basis ended strongly, with October the best performing month with holiday shopping more prevalent compared to pre-pandemic.
  • From a merchandising perspective, the company experienced y/y declines across most product categories with the largest impacts coming from computing and home theater.
  • However, Basham said computing remained well above pre-pandemic levels.
  • Best Buy’s latest guidance implies comparable sales declining about 10% in 4Q22 as well as operating margins down 110 bps y/y to 4.1%.
  • The company expects more normalized shopping activity concentrated during Black Friday week, Cyber Monday and the two weeks leading up to Christmas.
  • Basham expects that Totaltech could drive slight gross margin improvement as BBY continues to iterate and scale the program.
  • While he continues to see potential for store labor and footprint transformation in the mid- to long-term to drive higher margins, near-term macro pressures as well as prospects for flat-to-down 2023 operating margins have led him to remain Neutral.
  • Price Action: BBY shares are trading higher by 1.09% at $80.74 on the last check Wednesday.

This post was originally published on this site

Be First to Comment

Leave a Reply

Your email address will not be published.