Embattled electronics giant Best Buy said operating income fell more than fifty percent this quarter, as same-store sales declined more than three percent from the year ago period.
Adj. EPS of $0.20 vs. Street’s $0.31
BBY reported 2Q13 adj. EPS of $0.20 vs. consensus of $0.31. The worse-than-expected results were on lower revenue, lower gross margin, partially offset by lower SG&A growth. Total sales declined -2.8% Y/Y on consolidated SSS of of -3.2% (-1.6% for domestic and -8.2% for international). On a two-year stack, this represents a -480bps of sequential decline.
Suspends Guidance and Share Repurchase Increasing Uncertainty
Due to the lowered expectations for industry wide sales and uncertainty in timing of several key product launches later this year, the company has lowered its annual earnings expectations. In addition, Herbert Joly, newly appointed CEO, will start
in September. As a result, BBY no longer will provide earnings guidance for the remainder of the year. Furthermore, the company has suspended its share repurchases for fiscal 2013 as it transitions to a new CEO. We wouldn’t expect
to hear a new plan from the CEO until at least 1H FY14.
Why Not To Short?
1) likely limited further downside given near trough valuations,
2) a moderation in the rate of pricing declines in the consumer electronics channel,
3) a possible further turnaround plan for the company now that a new CEO has been named, and
4) a compelling FCF profile partially offset by ongoing fundamental challenges in the industry and at the company.

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