BBY

Best Buy’s Comparable Sales Decline Moderates

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Electronics retailer Best Buy (click ticker for report: ) posted better-than-anticipated second quarter results Tuesday morning. Revenue was basically flat year-over-year at $9.3 billion, exceeding consensus estimates. Adjusted earnings-per-share was 23% higher year-over-year at $0.32, well above consensus expectations. Year-to-date, free cash flow was negative at $282 million, but we’re not worried considering this figure is much improved compared to the prior-year period. Source: Valuentum, Company Filings In our view, the most encouraging news in the quarter was the firm’s domestic same-store sales, which were down just 0.4% year-over-year. In fact, we can see from the above chart that the two-year trend at the important domestic store base is improving, while online sales continue to grow at a solid rate. … Read more

RadioShack: Cigar Butt, Valuentum Won’t Puff

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Famed investor Benjamin Graham, author of Security Analysis and the Intelligent Investor, made a fortune out of what he liked to call “cigar butts.” These stocks were often poor operating businesses selling for less than liquidation value. Graham would purchase said stocks with the hope that there was one last “puff” of profit left. Not all of them worked out positively, but Graham would bet on dozens of stocks trading at less than book value and hope for the best. RadioShack (click ticker for report: ) looks like a cigar butt. The firm’s core operating business is rapidly deteriorating, the firm is generating negative free cash flow, and recent rumors suggest the company is hiring advisors to help shore up … Read more

Best Buy’s Comps Are Soft; Risk/Reward Not Compelling

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After shares nearly flirted with $10 in December, electronics retailer Best Buy (click ticker for report: ) has seen its stock more than double thanks to moderating sales declines and a store revamping strategy that displayed great promise. However, Best Buy’s first quarter fell short of consensus expectations as the Street got a bit ahead of itself in gauging the velocity of the turnaround. Revenue declined 10% year-over-year to $9.3 billion, which was well below consensus estimates. Adjusted earnings per share fell 58% compared to the prior year to $0.32 per share, which was a touch better than consensus expectations. Free cash flow swung to negative $179 million for the quarter, reflecting the firm’s inability to earn net income more … Read more

Who’s Amazon’s Next Victim?

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An interesting white paper was released recently, analyzing how Amazon (click ticker for report: ) is altering the retail landscape. The paper itself had some interesting insights, but our favorite takeaway of Placed’s work was the top ten companies at risk. 1.    Bed Bath and Beyond (click ticker for report: ) 2.    PetSmart (click ticker for report: ) 3.    Toys ‘R Us 4.    Best Buy (click ticker for report: ) 5.    Sears (click ticker for report: ) 6.    Barnes & Noble (BKS) 7.    Kohl’s (click ticker for report: ) 8.    Target (click ticker for report: ) 9.    Costco (click ticker for report: ) 10. JC Penney (click ticker for report: ) For the most part, we agree with the list, … Read more

Best Buy Showing Signs of Life

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Big box retailer Best Buy (click ticker for report: ) posted solid results for its fiscal year 2013 fourth quarter. Thanks to an extra selling week, revenue was roughly flat year-over-year at $16.7 billion, exceeding consensus estimates. Earnings, adjusted to reflect operating expenses, declined 25% year-over-year to $1.64 per share, which was better than consensus expectations. Overall, sales slipped about 1%, but still totaled $49.6 billion for the year. The domestic segment is showing signs of life, with domestic same-store sales increasing 0.9% and online growth jumping 11.2% during the quarter. Overall sales fell 0.3% year-over-year as the firm shuttered 49 big box locations. The firm experienced a modest increase in SG&A costs, which were up 140 basis points as … Read more

With M&A Popping, We Think More Deals Lie Ahead

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Monday morning, Barnes and Noble’s (BKS) Chairman Leonard Riggio announced that he will finance a bid to take the company’s retail operations private. This comes after the announcement of several other major deals, including the OfficeMax/Office Depot Merger, Berkshire (BRK.A) and 3G Capital’s acquisition of Heinz (HNZ), and Michael Dell’s bid for Dell (click ticker for report: ). Let’s take a look at some potential targets. Apollo Group Results in the for-profit education space have experienced significant downward pressure during the past few years. Apollo Group (click ticker for report: ), owner of the University of Phoenix, has seen its share price cut by 64% during the past year, after being a cash-generating darling just a few years ago. The … Read more

Why GameStop Looks Like a Value Trap

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At Valuentum, we pride ourselves on a multi-faceted investment methodology, acknowledging that several market-movers view any given investment from different perspectives. That is precisely why we’re staying away from shares of GameStop (click ticker for report: ), which scores poorly on the Valuentum Buying Index (our stock-selection methodology). Let’s take a look at why we don’t like the company. Changing Dynamics of Gaming Culture One of the unique features of the video game market has been the relatively liquid buying and selling of games. Since the days of FuncoLand (which was eventually acquired by GameStop), consumers could purchase and sell games new or used, and the game shops would help facilitate this market. Have a copy of Nintendo’s Super Mario that … Read more

Dell Gets No Respect from the Street; Is it Time to Go Private?

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Rumors surrounding computer maker Dell (click ticker for report: ) going private stole the show yesterday afternoon. Several reports indicate that CEO and founder Michael Dell could be leading the charge to take the company private as the market continues to saddle the firm with a low multiple. We peg Dell’s fair value at $18 per share, so we completely understand what private equity investors are looking at. We think the deal makes a lot of sense for shareholders, but not necessarily for the company. Shares have been steadily declining as the firm’s core PC business fades, and we believe plenty of shareholders would love to be bailed out by a private equity bid that values the company at a … Read more

More Holiday Results Pour In; Fortunes Diverge

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Monday morning, additional holiday results have rolled in, and not surprisingly, the results diverged materially. Hhgregg (HGG), the electronics and appliances retailer that has attempted to fill the void left by Circuit City’s closing, reported terrible third-quarter results. Total sales dropped 3.6% year-over-year to $799.6 million, with same-store sales tumbling 9.7% compared to the year ago period. The decline was driven by weak video (TV) sales, which fell 24.6% on a comparable-basis, and a 6.1% increase in appliances that was well behind Best Buy’s (click ticker for report: ) performance. As we’ve previously addressed, the big box electronics retailers are having a tough time not only finding new items to fill the void of declining media sales, but firms have … Read more

Best Buy’s Holiday Sales Were Solid; Margins Are the Issue

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This morning, the maligned big box electronics retailer Best Buy (click ticker for report: ) provided updates on its holiday sales results, which were relatively strong, in our view. Breaking the downward spiral, same-store sales in the US were flat compared to last year, but continued to decline internationally, down 6.4% year-over-year. However, overall sales declined to $12.8 billion for the 9-week holiday season compared to $12.9 billion for the same period last year, suggesting overall business was fairly solid. Consistent with trends throughout 2012, consumer electronics were weak, while ‘Computing and Mobile Phones’ revenues surged. Source: Best Buy Holiday Sales Report, Valuentum Consumer electronics, largely comprised of TVs, has been weak and probably will continue to be until we see … Read more