More Important Data from Best Buy’s Earnings

Best Buy’s (NYSE:BBY) Q1 was about in-line. Revenue was $10.9 billion, compared with our estimate of $10.8 billion and consensus estimate of $10.7 billion. Comparable store sales were -1.7% (-2.4% domestically and +0.4% internationally), compared with our expectation of a 4.2% decrease (-5.0% domestically and -2.0% internationally). EPS was $0.35, compared with our $0.37 estimate and the consensus estimate of $0.33.

Domestic positive comps for Computing & Mobile Phones (+4.7%), Appliances (+2.9%), and Services (+0.8%), but negative comps for Consumer Electronics (-6.8%) and Entertainment (-13.1%) categories. Strength in mobile phones and tablets was offset by declines in televisions and physical media.

The company maintained FY:12 guidance for revenue of $51.0 – 52.5 billion (though now towards the high end of the range), and for pro forma EPS of $3.30 – 3.55. The company maintained comps guidance of flat to -3%. The company did not provide quarterly guidance.

Increasing our FY:12 estimates for revenue to $52.5 billion from $52.3 billion, but lowering our EPS estimate to $3.43 from $3.45 to reflect Q1 results. Maintaining our FY:13 estimates for revenue of $54.4 billion, and for EPS of $3.59.

We continue to believe that Best Buy’s business strategy of carrying the biggest and best items at premium price points in big retail stores is beginning to age as we see a shift to comparison and online shopping. We expect meaningful long-term sales growth to remain elusive due to its reluctance to lower prices and the continued migration to online shopping.

We are not optimistic that Best Buy (NYSE:BBY) can gain significant video game market share against leading specialty retailer GameStop (NYSE:GME). Despite recent initiatives in video games, GameStop continues to gain market share.

Michael Pachter is a retail analyst at Wedbush Morgan.