Best Buy a Retail Health Read

For fiscal 2008, traders will be looking for Best Buy to provide guidance around Wall Street's forecast of $3.18 a share in earnings and $39.8 billion in revenue. Investors also hope to hear more about the company's initiatives in China as well as last week's acquisition of Speakeasy.

Normally, margins are a critical component of the analysis of a company's financials. Given Best Buy's discounting, those numbers will certainly be scrutinized in this report as well. Investors, however, should consider the big picture.

Best Buy is expected to report declining gross and operating margins for the full year, yet still post earnings per share near the high end of its guidance of $2.65 to $2.80. Bernstein Research's Colin McGranahan wrote in a recent report that should Best Buy hit its earnings guidance, it "speaks both to the company's ability to execute in volatile times and to what is likely somewhat conservative guidance that BBY can achieve in several different ways."

Moreover, McGranahan says that considering the year is so back-end loaded, the guidance is most likely cautious, giving the company ample opportunity to hit the target. Bernstein doesn't have a banking relationship with Best Buy.

I agree with McGranahan. Management teams such as Best Buy's that find a way to get it done, especially when all does not go according to plan, are to be treasured. In a climate where excuses are the norm, it appears that Best Buy will reach its goals despite less-than-optimal conditions.