Best Buy a Retail Health Read

Now that Microsoft's (MSFT Quote) Vista is available and receiving a cool reception, it's unlikely that PCs will see the major spike in sales that was previously anticipated. Also, Best Buy's sales growth in TVs is expected to slow considerably from the torrid 35% pace in 2006.

Without these significant boosts that could skew sales, Best Buy's results could provide a clearer signal about how the rest of the retail sector will perform.

You know that Best Buy will bring in the customers, but if it is continuing to discount heavily to do so, that could have implications not only for Circuit City but also for RadioShack (RSH Quote), GameStop (GME Quote) and even Amazon.com (AMZN Quote) and Wal-Mart (WMT Quote). The latter two have been actively trying to grab share in the consumer electronics space.

I also want to get a sense as to whether the spike in gas prices over the past few weeks has hurt traffic and/or sales. That could be an important tip-off as to what to expect from consumers this summer. If Best Buy feels the pinch of higher gas prices, one can only imagine the effect on restaurants, discounters and apparel retailers.

Focus on the Bigger Picture

Best Buy is expected to post earnings of $1.52 a share for the fourth quarter and $2.76 a share for the year. Looking ahead, Wall Street sees earnings of 54 cents a share for the current first quarter, with sales of $7.96 billion.