Best Buy Co. Earnings Cheat Sheet: Margins Shrink on Rising Costs, Net Income Falls

S&P 500 (NYSE:SPY) component Best Buy Co. (NYSE:BBY) reported its results for the third quarter. Best Buy is a retailer that sells appliances, consumer electronics, home office products, and software.

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Best Buy Earnings Cheat Sheet for the Third Quarter

Results: Net income for the electronics store fell to $154 million (42 cents per share) vs. $217 million (54 cents per share) a year earlier. This is a decline of 29% from the year earlier quarter.

Revenue: Rose 1.8% to $12.1 billion from the year earlier quarter.

Actual vs. Wall St. Expectations: BBY reported adjusted net income of 47 cents per share. By that measure, the company fell short of mean estimate of 51 cents per share. Analysts were expecting revenue of $12.14 billion.

Quoting Management: “I’d like to thank our employees around the world for their tireless efforts during the third quarter and a successful kickoff to the holiday selling season,” said Brian J. Dunn, CEO of Best Buy. “We took actions to provide value to customers and drive our business in this competitive consumer environment. We are pleased to report positive traffic, comparable store sales growth and continued progress on our key strategic focus areas, highlighted by strong performance online.”

Key Stats:

Gross margin shrank 0.8 percentage point to 24.3%. The contraction appeared to be driven by increased costs, which rose 2.8% from the year earlier quarter while revenue rose 1.8%.

The company has now fallen short of estimates in the last two quarters. In the second quarter, it missed expectations by 6 cents with net income of 47 cents versus a mean estimate of net income of 53 cents per share.

Net income has dropped 18.5% year over year on average across the last five quarters. Performance was hurt by a 30.3% decline in the second quarter from the year earlier quarter.

Looking Forward: For next quarter, analysts have a more positive outlook about the company’s expected results. The average estimate for the fourth quarter is $2.17 per share, up from $2.10 ninety days ago. The average estimate for the fiscal year has seen a bump from $3.40 per share sixty days ago to $3.45.

Competitors to Watch: CONN’S, Inc. (NASDAQ:CONN), RadioShack Corporation (NYSE:RSH), hhgregg, Inc. (NYSE:HGG), GameStop Corp. (NYSE:GME), Apple Inc. (NASDAQ:AAPL), Target (NYSE:TGT), Wal-Mart (NYSE:WMT), Funtalk China Hldgs. Ltd. (NASDAQ:FTLK), Systemax (NYSE:SYX), (NASDAQ:AMZN) and eBay (NASDAQ:EBAY).

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(Company fundamentals provided by Xignite Financials. Earnings estimates provided by Zacks)