This Day On The Street
Continue to site
This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here

Did Black Friday Save Best Buy's Earnings?

NEW YORK ( TheStreet) -- Best Buy (BBY - Get Report)may have been one of the biggest winners on Black Friday, but the shopping frenzy on Thanksgiving weekend probably didn't fix the company's core issues.

"All Best Buy can be credited with is planning the day well," said Howard Davidowitz, chairman of Davidowitz & Associates, a retail consulting and investment banking firm. "In 2010, Best Buy didn't promote aggressively and lost market share to rivals like Wal-Mart (WMT - Get Report), Target (TGT - Get Report) and Amazon (AMZN - Get Report). This year they did. It doesn't change the fact that they have major margin issues and problems."

Best Buy has been trying to shake its image as Amazon's showroom -- a place where shoppers go to test and play with merchandise and then go online to actually make the purchase. This year, Best Buy took more of a price-leadership role over the Black Friday weekend, especially on the television front, with some deals even better than Amazon's, Credit Suisse analyst Gary Balter noted following the shopping weekend.

The electronics retailer also offered unique in-store only promotions, forcing shoppers to visit the stores, and offered special deals through Facebook and Shopkick and opened its doors at midnight on Black Friday this year versus 5 a.m. in years past, which appeared to have been a key strategic move.

Best Buy is scheduled to report fiscal third-quarter earnings on Tuesday. Analysts are calling for a profit of 51 cents a share on revenue of $12.14 billion.

Best Buy's sales have declined for five consecutive quarters and the company cut its profit outlook in September. The company continues to face margin pressure even with significant cost-cutting measures.

While analysts are predicting a rebound in domestic same-store sales, with buy side analysts forecasting at least a 1% increase at this point, this is mostly due to heavy promotions, which should continue to limit growth to the bottom line.

J.P. Morgan analyst Christopher Horvers predicted domestic margins will be down 25 basis points year over year in the quarter.

"If there is any downside risk to estimates in the third quarter, it will more likely be on this line item," he wrote in a note.

"Best Buy has rallied since the start of the improvement in data earlier this fall. With the bar now much higher, we are reluctant at these levels to hold the trade long into the print," Horvers wrote. "With sales in the key TV and PC category likely to remain uneven and considering our longer-term concerns regarding product cycle commoditization/convergence, market share shifts and box issues, we believe there is little to hold onto besides valuation. In fact, we believe Best Buy should continue to trade at a lower relative valuation versus the group and the market."
1 of 2

Check Out Our Best Services for Investors

Action Alerts PLUS

Portfolio Manager Jim Cramer and Director of Research Jack Mohr reveal their investment tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
Quant Ratings

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
Stocks Under $10

David Peltier uncovers low dollar stocks with serious upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
14-Days Free
Only $9.95
14-Days Free
Dividend Stock Advisor

David Peltier identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Updates with exact steps to take - BUY, HOLD, SELL
Trifecta Stocks

Every recommendation goes through 3 layers of intense scrutiny—quantitative, fundamental and technical analysis—to maximize profit potential and minimize risk.

Product Features:
  • Model Portfolio
  • Intra Day Trade alerts
  • Access to Quant Ratings
Real Money

More than 30 investing pros with skin in the game give you actionable insight and investment ideas.

Product Features:
  • Access to Jim Cramer's daily blog
  • Intraday commentary and news
  • Real-time trading forums
Only $49.95
14-Days Free
14-Days Free
AMZN $674.50 11.00%
BBY $32.66 -2.40%
TGT $81.33 -2.35%
WMT $68.91 -0.73%
AAPL $94.66 -3.20%


Chart of I:DJI
DOW 17,830.76 -210.79 -1.17%
S&P 500 2,075.81 -19.34 -0.92%
NASDAQ 4,805.2910 -57.85 -1.19%

Free Reports

Top Rated Stocks Top Rated Funds Top Rated ETFs