Best Buy surges after beating expectations and raising forecast ahead of the holidays

Key Points
  • Best Buy reports third-quarter earnings that beat expectations on the top and bottom lines.
  • The company also raises its forecast for fiscal 2020 adjusted earnings to a range of $5.81 to $5.91 per share from $5.60 to $5.75 per share.
Best Buy is one of many retailers impacted by the U.S.-China trade war.
NurPhoto | Getty Images

Best Buy shares surged to a 52-week high on Tuesday after the company reported earnings and revenue that beat analysts' expectations and raised its earnings guidance.

In morning trading, shares were up 8%, after briefly touching $80.54, a high for the past year. Shares of Best Buy were up 40% this year as of Monday's closing, bringing its market value to $19.6 billion.

Here's what Best Buy reported compared with what analysts were expecting, based on a survey of analysts by Refinitiv:

  • Earnings per share, adjusted: $1.13 vs. $1.03 expected
  • Revenue: $9.76 billion vs. $9.70 billion expected
  • Same-store sales growth: 1.7% vs. 1.3% expected

"Our teams delivered another strong quarter of top- and bottom-line growth," CEO Corie Barry said in the earnings release. "We are delivering on our purpose to enrich lives through technology by providing customers the products and solutions they want and need, combined with fast and convenient fulfillment."

In the third quarter ended Nov. 2, Best Buy said net income grew to $293 million, or $1.10 per share, from $277 million, or 99 cents per share, a year earlier.

Excluding items, Best Buy earned $1.13 per share compared with the $1.03 analysts were expecting, according to Refinitiv.

Best Buy said revenue grew to $9.76 billion, from $9.59 billion last year, and higher than the $9.70 billion analysts expected.

Sales at stores open at least 12 months rose 1.7%. Analysts were expecting a 1.3% gain.

The company raised its forecast for fiscal 2020 adjusted earnings to a range of $5.81 to $5.91 per share from a prior estimate of $5.60 to $5.75 per share. Analysts were expecting Best Buy to earn $5.74 per shares in 2020, excluding items.

In the short term, Barry said the company is excited about its holiday plans, which include next-day delivery on thousands of items with no membership or minimum purchase required. Customers will also be able to pick up products in store within an hour of placing the order. Best Buy announced that it will offer next-day delivery in late October, just in time for the holidays.

The retailer also launched 175 alternate pickup locations in the New York City and Chicago areas where there may not be a convenient store location. The New York locations are at CVS and UPS stores and UPS in Chicago.

Charlie O'Shea of Moody's said Best Buy's holiday season setup has positioned the company to continue as a top performer in retail, adding that it will continue to build momentum.

"Best Buy's raising of earnings guidance for Q4 in the face of already cutthroat promotional activity is a reflection of a high level of confidence in its holiday strategy," O'Shea said.

The fourth quarter is crucial for retailers because of the holiday season. The National Retail Federation forecasts that holiday sales during November and December will grow 3.8% to 4.2% over last year.

Best Buy shares cratered after its earnings report last quarter as investors worried about the impact of the looming Dec. 15 tariffs on Chinese consumer goods.

The electronics retailer said last quarter that although it had tried to factor the tariffs into its guidance, it was still uncertain. Some Best Buy products were hit with tariffs that went into effect on Sept. 1, and more could be hit with the 15% duty on Dec. 15, including mobile phones, laptops and gaming consoles.

Barry said the updated guidance includes "our best estimate of the impact of tariffs."

Since the fourth quarter is highly promotional, Barry said on an earnings call that it will be more about "promotional positioning throughout the quarter" and less about "whether or not there's a tariff on any individual item."

Earlier this month, Best Buy released its Black Friday ad full of hundreds of deals that were immediately available to customers. The company said on its earnings call it will continue to roll out offers throughout the holidays.

Despite tariff headwinds, the once-embattled electronics retailing giant said it expects to grow same-store sales in fiscal 2020 under Barry's leadership.

Barry became CEO in April, replacing Hubert Joly, now executive chairman, who had orchestrated a turnaround after years of losing business to online retailer Amazon. Barry, who had been Best Buy's CFO, said she plans to double down on its existing strategies.

Read the full press release here.

Best Buy CEO Corie Barry wants to 'double down' on its strategy, despite disruptions such as tariffs
Best Buy CEO Corie Barry wants to 'double down' on its strategy, despite disruptions such as tariffs

Correction: A previous version of this story misstated the fiscal year. Best Buy reported earnings for third quarter of fiscal 2020.