Best Buy Co Inc (NYSE:BBY) Tepid Q1 Forecast Drags Stock Down

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While Best Buy Co Inc (NYSE:BBY) delivered better than expected earnings and revenues for the fourth quarter, tepid guidance is still dragging the stock down. Higher earnings came despite weakness in comparable store sales, both domestic and enterprise though its online comparable sales growth rate improved from the preceding year period. The company guided first quarter adjusted earnings and revenue below Street analysts’ predictions, and that proved to be a dampener for investor sentiment.

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Outlook For Q1

Best Buy said that it expects enterprise revenue between $8.25 and $8.35 billion in the first quarter representing a fall of 2.4% – 3.6%. On the other hand, analysts’ see a 1.2% fall in revenue to $8.45 billion. The retailer also expects international revenue to fall 15 – 20% in the same period. The company does not see any turnaround of fortunes in its comparable store sales and sees a fall of 1.0 – 2.0% in the first quarter.

The retailer also expects its adjusted earnings between 31 cents and 37 cents a share, which was lower than the Street predictions of 39 cents a share. The company expects an increased adjusted income tax rate thus negatively impacting its earnings by two cents a share. However, it stands to gain three cents a share from the repurchases of shares executed in the year 2015.

Q4 Results

Best Buy said that its net earnings fell 7.7% to $479 million from $519 million while earnings dipped 4.1% to $1.40 a share from $1.46 a share last year. Excluding adjustments the company would have reported earnings of $1.53 a share for the fourth quarter, which was 14 cents a share higher than Street analysts’ expectations of $1.39 a share.

The top line for Best Buy fell 4.1% to $13.62 billion from $14.21 billion in the previous year quarter. This was marginally higher than Street predictions of $13.61 billion. Its comparable sales fell 1.7% while comparable online sales recorded 13.7% growth compared to the 9.7% growth pace witnessed in the previous year period.

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