Best Buy Co. Inc. (BBY) will begin selling the Apple Inc. (AAPL) iPhone, previously only available at Apple and AT&T Inc. (T) retail locations. While Best Buy is not likely to make much on the sale of the phone itself, the electronics retailer should profit from the sale of higher margin accessories, The New York Times reported. They already sell the iphone now and it didn't bring in as much traffic as expected but I believe any added traffic is beneficial to the company
As prices on flat-screen TVs fall and more consumers decide to purchase these high-end televisions many will opt for home installation services from Best Buy, which will significantly increase profits.
Best Buy's main competitor, Circuit City, filed for bankruptcy in November 2008 after struggling for consecutive quarters due to the economic downturn. The economic slowdown has affected consumer confidence decreasing discretionary spending. Although the economic malaise will not allow Best Buy to post any significant gains, it stands to gain market share and revenue. Best Buy has been the largest U.S. consumer electronics retailer and with Circuit City out of the way it will continue to be the electronic giant.
After the April Fools day 2008, 400 point rally in the Dow Jones, Best Buy was set to report its quarterly numbers and they turned out to be no joke indeed. In a start to the year pegged with Recession and Consumer Spending worries Best Buy reported profits of $1.71/share or $737Million. That compared to last year's $1.55/share and $763Million. The big share repurchase program helped the numbers compare favourable year over year. Yes profit was down fractionally, but analysts were expecting even lower results with forecasts of $1.65/share earnings. Revenue came in above expectations also ($13.42Billion v $13.19Billion expected). Just goes to show that the consumer isn't dead just yet!
While 2008 may prove to be challenging in a tightening US economy, Best Buy provided some optimistic guidance numbers that pleases the analysts on Wall Street. The company gave a range of $3.25 to $3.40 per share in earnings on $43Billion to $44Billion in revenues. Analysts expected $3.31 on $43Billion in revenue. Not bad considering management basically came out and said that the year was as turbulent as any other they've ever seen. So anytime a company predicts a hard year but maintains almost 20% growth investors need to stand up and take notice. Especially when that company's shares currently price at a Forward P/E of just over 13. Meaning that the Price to Earnings Growth number stands at a tiny 0.66.