Best Buy Co., Inc. (NYSE: BBY) beat Wall Street's estimates Tuesday with second quarter earnings of 28 cents a share. The results were a penny ahead of First Call's consensus estimate of 27 cents a share.
Shares of the retailer of consumer electronics, personal computers, entertainment software and appliances sank 1 5/16 to 59 1/8 Tuesday morning, below their 52-week high of 80 1/2. Shares have climbed moderately since the company beat expectations in its previous quarter.
Earnings of $59 million or 28 cents a share were an increase of 34 percent compared to earnings of $44.1 million or 21 cents a share reported in the second quarter last year. For the first six months of fiscal 2000, net earnings increased 78 percent to a record $106.3 million or 50 cents per diluted share, according to the company's release.
The year-over-year increase in earnings was especially significant since "the current quarter included the expense of opening 19 new stores compared to none in last year's second quarter. Store pre-opening expenses impacted earnings by 4 cents per share for the quarter," said CEO Richard M. Schulze in the company release.
Revenue for the second quarter increased 23 percent to $2.7 billion from $2.2 billion a year ago. Comparable store sales increased 11.1 percent for the quarter.
Schulze cited consumer confidence and an expansion of gross profit margins for the company's financial performance. "Our seventh consecutive quarter of double-digit comparable store sales increases was led by digital technology products," he added.
Gross profit margins were 19.8 percent, an improvement from the 1 percent in last year's comparable quarter due the company's program to improve inventory management, advertising effectiveness and create more profitable product assortments.
In the second quarter the company opened five new stores in San Francisco and three small market version stores. Twenty-three new stores are slated to open across the country during the third quarter, and the company has also announced plans to enter the metropolitan New York market with approximately a dozen stores next fiscal year. "An expanded number of stores opened earlier in the year should contribute to improved earnings during the all important holiday season," Schulze said. The company operates 332 retail locations in 36 states, and offers products online.