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Why Best Buy Stock Fell despite Strong Q1 Earnings


May. 23 2019, Published 2:15 p.m. ET

First-quarter results

Best Buy (BBY) reported better-than-expected earnings for the first quarter of fiscal 2020, which ended on May 4. Still, the stock was down 5.7% as of 2:12 PM today as the company warned of higher prices for US consumers if the next round of tariffs on Chinese goods comes into effect. Other retailers, like Walmart, have also cautioned about possible price increases due to tariffs.

Best Buy’s revenue grew 0.4% to $9.14 billion in the first quarter of the company’s fiscal year as higher domestic revenue was offset by lower international revenue due to the impact of currency headwinds. The company’s revenue was in line with analysts’ forecast. Best Buy’s same-store sales grew 1.1% in fiscal 2020’s first quarter—a major slowdown compared to same-store sales growth of 7.1% in fiscal 2019’s first quarter.

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Best Buy’s adjusted EPS increased 24.4% to $1.02 in the first quarter, beating analysts’ forecast of $0.86 pretty significantly. Best Buy’s gross margin expanded by 40 basis points in the quarter due to a higher margin associated with GreatCall, a connected health service provider that the company acquired in August 2018. Best Buy’s operating margin expanded by 50 basis points on an adjusted basis.

Guidance unchanged

Despite strong growth in the first quarter’s adjusted EPS, Best Buy kept its previously issued guidance for fiscal 2020 unchanged due to the impact of the recent increase in tariffs from 10% to 25% on $200 billion of Chinese imports.

Best Buy continues to expect its fiscal 2020 revenue in the range of $42.9 billion–$43.9 billion, compared to $42.9 billion in fiscal 2019. Fiscal 2020 same-store sales are expected to grow in the range of 0.5%–2.5%. Best Buy expects its fiscal 2020 adjusted EPS in the range of $5.45–$5.65.


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