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

Best Buy Preview: What Wall Street Is Saying

This story has been updated from 10:32 am EST to include reports of management layoffs, stock price update.

NEW YORK (TheStreet) - On Thursday morning, investors will hear just how bad competition over the holiday season dented Best Buy (BBY - Get Report) when it reports fourth-quarter earnings.

The Richfield, Minn.-based electronics chain already said in January comparable store sales for the first nine weeks of the quarter dropped 0.8%, compared to a consensus expectation of a 2% rise.

Comps at domestic stores specifically dropped 0.9%, reflecting a highly promotional and competitive environment from the likes of Amazon (AMZN) and Wal-Mart (WMT).

Best Buy said that revenue as of Jan. 4 had fallen 2.5% to $11.45 billion, compared to the prior year's quarter and that its non-GAAP operating margin would drop 175-185 basis points over last year.

As a result, Best Buy plans to rejigger strategic plans for 2014 to include lowering its cost structure "more quickly and more deeply;" grow its online channel at an "accelerated pace;" and reinvigorate and expand its Geek Squad services business, among other things, the company said at the time.

Wall Street will be looking for more clarity on those cost-cutting plans and just how it plans to take market share from big competitors.

According to a report by the New York Post, Best Buy plans to cut up to 2,000 mid-level managers this year at its more than 1,000 stores across the country. Best Buy has already notified roughly 500 "field managers" of job cuts last week, the Post claims. The firings are not expected to affect customer-facing employees.

A Best Buy spokesman declined to comment to TheStreet.

Must Read: Is There Any Hope for J.C. Penney?

"To us, the key to BBY's success is its ability to cut costs in order to fund its lower gross margin to stay competitive with Amazon," Deutsche Bank analyst Mike Baker wrote in a Feb. 18 note to clients. "This way, they should maintain or even increase market share, while driving higher earnings power, with SG&A reductions offsetting margin declines."

Following the sales report, analysts dropped their earnings estimates from an average profit of $1.62 a share at the time, to $1.01 a share, on average, currently, according to Thomson Reuters. Revenue is expected to fall 12% to $14.66 billion.

The consensus also expects comparable sales for the quarter to fall 1% for the quarter, following Best Buy's dismal holiday sales report.

The stock is down 33% since Jan. 15, the day before it announced its holiday sales. Shares were trading up 2.4% to $25.92 on Wednesday.

BBY ChartBBY data by YCharts

Here's what Wall Street analysts are saying leading up to earnings.

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
BBY $31.37 -1.29%
AAPL $117.34 -0.81%
FB $107.12 2.76%
GOOG $767.04 3.29%
TSLA $237.19 3.01%


Chart of I:DJI
DOW 17,888.35 +168.43 0.95%
S&P 500 2,102.63 +22.22 1.07%
NASDAQ 5,156.3060 +47.64 0.93%

Free Reports

Top Rated Stocks Top Rated Funds Top Rated ETFs