Trader Talk

Best Buy Supports Retail Turnaround


European markets are up as the Dubai government has announced a $9.5 billion recapitalization for Dubai World, and German Chancellor Angela Merkel said she would back aid to Greece, although it could only be in an "exceptional emergency" and should involve the IMF.


1) Best Buy up 6 percent pre-open, earnings of $1.82 above consensus of $1.79, revenues of $16.5 billion also above consensus of $16.08 billion, a 12 percent increase from the same period last year. Comp store sales were up 7 percent.

2011 guidance is $3.45-$3.60, above $3.37 estimates.

Flat panel TV sales were good (high single digit increase), but notebook computers and mobile phones were even better (low double-digit increases in both). Music and movies continue to decline, with low double-digit decreases.

Interestingly, expenses (SG&A) did not show any increase--bucking the trend with other retailers like Nike who have noted that higher compensation costs were coming.

2) Restaurants choppy: CKE Restaurants falls 2 percent as sales at its fast food restaurants continued to be weak due to poor weather on the East Coast and the sluggish economy, particularly in its big California market.

Although Q4 earnings topped Street forecasts, same-store sales at its Carl's Jr. chain dropped 9 percent and comps at its Hardee's restaurants fell 3 percent. In February, the company announced it had agreed to be acquired by private equity firm Thomas H. Lee Partners for $617 million.

Restaurant reports have been choppy: Darden had better earnings (Olive Garden, Red Lobster, and LongHorn Steakhouse), but Sonic , which runs a chain of drive-in restaurants, did not. They also blamed poor sales on the weather.

3) ConAgra Q3 earnings were inline with forecasts as strength at its consumer foods unit (sales up 2 percent) offset weakness in its commercial food division (sales down 6 percent). Volumes of consumer food brands, which include Chef Boyardee, Hunt's, Jiffy, and Slim Jim (a major food group), rose 3 percent.

The food maker reaffirms disappointing full-year guidance of $1.73, implying weaker-than-expected Q4 earnings of $0.39 (vs. $0.41 consensus).

4) Citigroup is up 2 percent after Bloomberg reports that the Treasury is seeking to sell its 27 percent stake in the bank using a set schedule of share sales that could be announced next month. This system would allow the Treasury to reveal the timing of the sale, the number of shares sold, and the price they would be sold at ahead of time.

5) Raytheon announced it was boosting its annual dividend by 21 percent to $1.50. The defense company also revealed that will increase its stock buyback program by $2 billion.

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