Best Buy's Big $1 Billion Buyback

 | Feb 25, 2016 | 3:00 PM EST
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Consumer electronics retailer Best Buy (BBY) jumped more than 2% in Thursday trading off news of its fourth-quarter earnings. The company also announced plans to hike its dividend 22%, while scooping up about $1 billion of its own stock over the next two years.

Earnings per share of $1.53 on the quarter ticked up 3% year over year, but sales were weighed down by a nearly $400 million decline in its international segment, which totaled $1.1 billion. Meanwhile, domestic sales fell 1.5% to $12.5 billion.

"In the fourth quarter, we delivered enterprise revenue of $13.62 billion, improved our non-GAAP operating income rate by 10 basis points to 5.9% and delivered a better-than-expected non-GAAP EPS of $1.53 versus $1.48 last year," CEO Hubert Joly said in a statement. "In our domestic business, we exceeded our bottom-line expectations due to a well-executed holiday plan, a disciplined promotional strategy, better recovery on returned and clearance product and strong expense management."

And it appears the Richfield, Minn.-based company is lately coming through on Joly's plans to scale down expenses: Shares are up 13% in February, but down 16% over the last 12 months. 

source: Best Buy website

Joly reiterated the company's "Renew Blue" strategy on Thursday, citing the importance to rebuilding Best Buy's image as a cutting-edge tech hub.

"Turning to fiscal 2017, we are entering the next phase of our Renew Blue strategy. Our purpose is to build a company that does a unique job of helping customers learn about and enjoy the latest technology," he said. "As we begin this phase, we will execute against the following priorities: One, build on our strong industry position and multichannel capabilities to drive the existing business; two, drive cost reduction and efficiencies; and three, advance key initiatives to drive future growth and differentiation."

Best Buy's revenue outlook also outpaced forecasts by Goldman Sachs (GS), which maintains a $33 12-month price target for Best Buy.

"The firm guided to a 2.4%-3.6% sales decline, better than our -4.0%, but below the Street's -1.1%," Goldman Sachs analysts Matthew Fassler and Katie Price said in a Thursday report.

"Downside risks relate to profit recovery in Canada and product cycle volatility," they said. "Upside risks relate to valuation, capital allocation, sales strength in TV/appliances."

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