Coverage: Best Buy stock rises on better-than-expected earnings

Retailer Best Buy Inc. reported earnings that beat analyst expectations and sales that also impressed investors, sending its stock price up by double digits.

Roger Yu of USA Today had the news:

Sales for the three-month period ending April 30 inched up 1% to $8.5 billion as robust online business compensated for slower growth at its stores. Same-store sales — or sales of stores that have been open at least a year — climbed 1.6%. But online sales in the U.S. spiked 22.5%.

Adjusted earnings per share of 60 cents handily beat the 40 cents estimated by analysts who were polled by S&P Global Market Intelligence. Best Buy also raised its fiscal year sales growth estimate to 2.5% from about 1.5% announced earlier.

Investors approved the results. Best Buy shares zoomed 19% in early Thursday afternoon trading to $59.96.

Net income from continuing operations tumbled 17% to $188 million partly due to higher cost of goods. The company, based in Richfield, Minn., said the year-over-year earnings comparison also was affected by a one-time gain of a $183 million settlement it received a year ago from suppliers over parts price-fixing lawsuits.

Richa Naidu of Reuters reported that the retailer has been helped by the economy:

Best Buy, like home-improvement chain Home Depot Inc, has benefited as an improving job market has spurred homeowners to spend more, particularly on appliances and home theaters. In March, the U.S. unemployment rate dropped to a near 10-year low.

Chief Executive Hubert Joly, speaking on a conference call, said Best Buy was “very mobilized” to maximize its gains from a competitor filing for bankruptcy during the quarter. Joly did not name the competitor.

“We believe we’re seeing some lift in the sales in the stores, of course, around (the competitor’s) locations in appliances and home theater,” said Joly, adding the rival company had about a 20 percent overlap with Best Buy’s stores.

Electronics retailer hhgregg Inc filed for bankruptcy in March, after struggling for years with declining sales.

Shares of Best Buy, based in Richfield, Minnesota, surged as much as 16 percent to $58.50 in morning trading.

The company reported a 1.6 rise in first-quarter sales at stores open for more than a year, against analyst expectations for a decline of 1.5 percent, according to research firm Consensus Metrix.

Lauren Thomas of CNBC.com reported that Best Buy’s stock rose 19 percent during the day:

Best Buy shares were up nearly 19 percent Thursday afternoon, reaching an all-time intraday high of $60.14.

The electronics retailer had warned in March that same-store sales could fall by 1 to 2 percent during the latest period, but on Thursday Best Buy reported growth of 1.6 percent at its established locations. Analysts were expecting a 1.5 percent decline, according to Thomson Reuters estimates.

The company’s CEO, Hubert Joly, said the increase in sales benefited from the anticipated arrival of delayed federal tax refund checks, with more consumers picking up gaming and mobile products.

“We delivered a strong performance in gaming due to robust customer demand and good product allocations for the new hardware that launched during the quarter,” Joly said on Thursday’s earnings conference call.

“Second… while mobile was not a growth area due to last year’s product recall and the fact that new phones launched later in the quarter than they did last year, sales in [the first] quarter were better than we expected as new unlimited data plan offers from the carriers generated increased demand across devices.”

The 1,400-store chain also benefits from selling higher-margin electronics and appliances at a time that traditional appliance sellers like Sears Holdings Corp. are struggling.