Best Buy Co Inc (NYSE: BBY) stock took a tumble on Thursday after it acknowledged that intense holiday sales competition would weigh on profits in the fourth quarter.
Best Buy reported third-quarter earnings per share of 78 cents, in line with consensus analyst estimates. However, revenue of $9.32 billion came up short of consensus expectations of $9.4 billion. In addition, Best Buy reported same-store sales growth of 4.4 percent compared to analyst expectations of 4.8 percent growth.
CEO Hubert Joly says Best Buy’s third quarter numbers took a hit from the delayed launch of the Apple ( AAPL) iPhone X.
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“Despite our moderate expectations for mobile phone launches in the quarter, revenue in the mobile category was materially lower than expected,” Joly says.
Apple’s iPhone 8 and iPhone 8 Plus launched in September, but the iPhone X launched in November.
Despite a lackluster third quarter, the main reason the stock is down 1.8 percent on Thursday morning is because of Best Buy’s guidance. The company issued fourth-quarter EPS guidance of between $1.89 and $1.99. Analysts were expecting $2.03. Best Buy also issued same-store sales growth guidance of between 1 and 3 percent compared to analyst estimates of 2.1 percent. The company projected fourth-quarter revenue between $14.2 and $14.4 billion.
Best Buy will be offering free shipping for its customers during the holiday season, a promotion that will hit profits.
J Rogers Kniffen founder Jan Kniffen says investors shouldn’t expect the retail environment to improve anytime soon. However, he says Best Buy remains best-in-breed in the electronics retail space.
“They have won their space as much as you can win electronics,” Kniffen said on CNBC. “They’ve reconfigured stores, they’ve leased out space, they’ve done all the things you need to do. It’s still a tough space, but if you want to be in that space, Best Buy is going to win in their category.”
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Despite the negative initial market reaction on Thursday morning, Best Buy stock has performed well in 2017 in an incredibly difficult and highly competitive retail landscape. Best Buy shares are now up 31 percent year-to-date compared to a 9.5 percent decline for the SPDR S&P 500 Retail ( XRT) exchange-traded fund.
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Best Buy Co Inc (BBY) Misses the Mark With Holiday Guidance originally appeared on usnews.com
