Best Buy Beats And Yet Disappoints

Best Buy:is leading retailers and the stock market lower today: is the Street changing the way it looks at retailers?

Despite beating expectations, Best Buy is down 7 percent.

What's the problem? One issue is that they elected not to change their guidance even though they beat handily.

But the bigger issue is sales. Comparable store sales were down 6 percent compared to the same period last year. True, the stimulus checks handed out last year have created difficult comps for retailers this quarter, not to mention the economic troubles.

So why is the stock down nearly 7 percent today? There seems to be a change of sentiment going on--it seems that sales trends are becoming more of the main driver of stocks rather than earnings beats, which are based primarily on cost cuts.

If that's the case, retailers may be in for a tougher time. Best Buy said trends had deteriorated in May, and their market share gains from Circuit City's demise do not appear as great as expected.

This supports the bears' main thesis: that the consumer will remain weak for the rest of the year, that a bottom does not mean we will have a notable recovery.



Questions? Comments?