Photo Credit: Mike Mozart

Best Buy Co., Inc. (BBY) Consumer Discretionary - Specialty Retail | Reports August 23, Before Market Opens

Best Buy is scheduled to report second quarter earnings early tomorrow morning. Many have written off Best Buy as a showroom for Amazon. The rising popularity of online retail has really taken its toll on the electronics store in recent years. It has forced the company to expand its omni channel capabilities and push more frequent discounts to compete in the rapidly changing environment. This has taken its toll on quarterly results in the form of higher operating expenses and lower margins. Tomorrow’s reports doesn’t appear to be the one that reverses this ongoing trend.

Analysts at Estimize are calling for earnings per share of 44 cents, down 8% from a year earlier. That estimate has increased 2% since Best Buy last reported in May. Revenue for the period is estimated to have declined by 1% to 8.42 billion. Shares are up 7% year to date and historically rise by 1% through an earnings report. 

All things considered, Best Buy has stayed relatively resilient while Amazon has thrashed the broader retail sector. Last quarter, comparables sales were essentially flat, with gains in online sales offsetting in store and international losses. Strength in wearables, home theater and appliances have kept growth afloat while mobile phones and tablets continue to suffer. Best Buy is seeing weakness as a third party seller of iPhones and iPads, a sentiment echoed in Target’s recent report.

This quarter is likely to be par for the course, but the real question will come from forward guidance. Third quarter earnings will include two key shopping events: Best Buy’s 50 year anniversary sale and back to school. If its anniversary sale is even a fraction as successful as Amazon Prime Day, Best Buy is in good shape. Back to school is also a heavy shopping period for incoming college students. Best Buy typically moves a considerable amount of smartphones, computers and video games during these months.