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Why Best Buy Stock is Down Despite Strong Fiscal Q2 Results

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Results ahead of expectations

Best Buy (BBY) stock was down 5.4% at 8:50 AM Eastern in today’s pre-market hours, following the announcement of the company’s results for the second fiscal quarter of 2019. The quarter ended on August 4. Best Buy reported better-than-expected revenue and earnings. However, the company’s online sales growth decelerated yet again. Investors were also let down by lower-than-expected earnings guidance for the third quarter of fiscal 2019.

Best Buy’s revenue grew 4.9% on a year-over-year basis to $9.38 billion. Analysts were expecting revenue of $9.28 billion. The company’s same-store sales grew by an impressive 6.2%, compared to 5.4% growth in the second fiscal quarter of 2018.

Improved consumer spending and the company’s initiatives under its Best Buy 2020 strategy are boosting top-line growth.

Best Buy’s online sales growth was 10.1% in the second quarter of fiscal 2019—a major slowdown compared to its 31.2% rise in the second fiscal quarter of 2018.

Best Buy’s adjusted EPS grew 31.9% to $0.91, beating analysts’ expectation of $0.83. Higher revenue and lower taxes drove EPS growth in the quarter.

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Guidance raised

Following the strong performance in the first half of fiscal 2019, Best Buy raised its outlook for fiscal 2019 as a whole. Best Buy now expects fiscal 2019 same-store sales growth of 3.5% to 4.5%, compared to the previous guidance of 0.0% to 2.0% growth. The company expects adjusted EPS in the $4.95–$5.10 range. Best Buy previously expected EPS in the $4.80–$5.00 range.

For the third quarter of fiscal 2019, Best Buy anticipates adjusted EPS growth of 1.0%–8.0% to $0.79–$0.84. Analysts were expecting adjusted EPS of $0.92. The company expects its fiscal third quarter same-store sales growth in the 2.5%–3.5% range.

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