Best Buy Soars on 2010 Forecast

NEW YORK ( TheStreet) -- Best Buy ( BBY) handily topped fourth-quarter estimates and forecast 2010 earnings higher than Wall Street's expectations, sending shares soaring in pre-market trading.

During the quarter, the electronics retailer earned $779 million, or $1.86 a share, compared with $570 million, or $1.38 in the year-ago period. Analysts were calling for earnings of $1.79 a share.
Best Buy

Revenue jumped 12% to $16.55 billion from $14.72 billion, while same-store sales rose 7%. Best Buy received a boost from sales of notebook computers, flat-panel televisions and mobile phones.

U.S. sales grew 11% to $12.6 billion, while international sales shot up 15% to $4 billion.

Best Buy said it gained market share by about 2.6 percentage points as it was the first holiday season that rival Circuit City was not in business.

Gross margins fell to 24% from 26%, with domestic gross margins down 100 basis points, at the low end of Best Buy's guidance.

Looking ahead, Best Buy forecasts full-year earnings in the range of $3.45 to $3.60 a share, significantly higher than Wall Street's outlook of $3.34 a share.

But the key question is where gross margin is going to come from in 2010, J.P. Morgan analyst Christopher Horvers wrote in a note. "Besides easy compares against the dramatic mix shift in the back half of this past year, we are curious what the other drivers are."

Shares of Best Buy are spiking 8.8% to $44.79 before the bell. Still, Horvers believes this earnings report will result in a "dramatic re-rating of the stock's valuation."

-- Reported by Jeanine Poggi in New York.

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