Why Best Buy Shares are Surging

NEW YORK (TheStreet) - Best Buy (BBY) shares were surging 8% to $27.88 in pre-market trading after the electronics retailer reported better-than-expected fourth-quarter profit fueled by its cost reduction initiative, announced in 2012.

On a GAAP basis, net earnings attributable to Best Buy came in at $293 million, or 83 cents a share, compared to a loss of $409 million, or $1.21 a share, in the year earlier quarter. GAAP earnings from continuing operations were 88 cents a share, compared to a loss of $1.36 a share last year, the company said Thursday morning.

On a non-GAAP basis, operating income from continuing operations came in at $1.24 a share versus $1.47 a share in the year-earlier quarter. Analysts were calling for earnings of $1.01 a share, according to Thomson Reuters.

Best Buy had laid out a plan at its 2012 Investor Day to realize roughly $725 million in cost savings across its roughly 1,000 stores in North America. The company said Thursday that total cost savings to date were roughly $765 million and boosted its overall cost cutting target to $1 billion.

It expects the additional cost savings to come from the "optimization" of returns, replacements and damages as well as logistics and supply chain.

That said, Best Buy is facing an intense competitive environment, pressured by the likes of Amazon (AMZN) and Wal-Mart (WMT).

Best Buy's revenue of $14.47 billion fell 3% compared to the year earlier. Quarterly revenue was softer than analysts' expectations of $14.66 billion.

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