Best Buy (BBY) Withdraws Guidance Amid Coronavirus Crisis

By Zacks Investment ResearchStock MarketsMar 22, 2020 09:44PM ET

www.investing.com/analysis/best-buy-bby-withdraws-guidance-amid-coronavirus-crisis-200518240

Best Buy (BBY) Withdraws Guidance Amid Coronavirus Crisis

By Zacks Investment Research | Mar 22, 2020 09:44PM ET

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In response to the increasing uncertainty and changes in operating activities amid coronavirus crisis, Best Buy Co., Inc. (NYSE:BBY) has chosen to withdraw its earlier announced guidance for first-quarter and fiscal 2021.

For fiscal 2021, management had forecasted Enterprise revenues of $43.3-$44.3 billion and Enterprise comparable sales growth of flat to up 2%. It had projected adjusted operating income rate of 4.8% and adjusted earnings per share of $6.10-$6.30 for the fiscal year. For the fiscal first quarter, management had anticipated Enterprise revenues of $9.1-$9.2 billion and comparable sales growth of flat to up 1%. It had expected first-quarter adjusted earnings per share of $1-$1.05.

Moreover, in order to strengthen its liquidity and financial flexibility during such tough times, the company drew the total amount of $1.25 billion under its revolving credit facility. This is in addition to cash and cash equivalents of roughly $2 billion as of Mar 19, 2020. Given the prevalent situation, it wise decision on the part of the company to suspend share buybacks.

Furthermore, Best Buy has been enhancing its curbside service, thus enabling customers to continue purchasing items online or via app. Meanwhile, all in-home installation and repair is suspended for the time being, while the in-home consultations are conducted virtually. The company will pay for two weeks to those employees whose hours have been eliminated, at the normal wage rate on average hours worked in the last 10 weeks.

We note that Best Buy’s online division has been gaining from higher average order values as well as increased traffic and conversion rates. Also, the Zacks Rank #3 (Hold) company’s “Building the New Blue: Chapter Two” initiative bodes well. Through this, management targets to pursue growth opportunities, better execution in key areas, cost containment, and investing in people and systems. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

In the past three months, shares of Best Buy have tumbled 41.1%, narrower than the industry’s 51.8% decline.

Bottom Line

The novel coronavirus has been hurting most of the companies and derailing economic activities worldwide. In view of the pandemic, retailers are either shutting down stores or reducing operating hours or working remotely. Incidentally, several retailers have decided to withdraw their guidance owing to the volatile situation surrounding the deadly virus, and its impact on their performance. Likewise, retailers such as Abercrombie & Fitch (NYSE:ANF) , Nordstrom (NYSE:JWN) and American Eagle Outfitters (NYSE:AEO) withdrew their initial guidance and closed stores.

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Best Buy (BBY) Withdraws Guidance Amid Coronavirus Crisis

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