The best buy? Would have been one made prior to Tuesday morning's release of Best Buy's (BBY) second quarter financial results. I did not make such a purchase. The numbers are eye-popping. Adjusted EPS for the quarter printed at $2.98, good for earnings growth of 74%, and beating Wall Street by more than a dollar. GAP EPS landed at $2.90, which also beat the Wall Street by a buck, and shows growth of 76%. Omitting a $0.47 per share benefit from a lower y/y effective tax rate, earnings growth drops to "just" about 47%.
Revenue generation amounted to $11.85 billion, good for annual growth of 19.6%, up 24% from two years ago, and a solid beat of Wall Street's expectations. Same store sales increased 19.6%, company-wide. Domestically, that number rises to 20.8%. Domestic comparable online sales actually took a step backwards at -28.1%, but remember... one year ago was when everyone was building up their home offices, and online comparable sales increased 242% one year ago from two years ago.
Cash and cash equivalents are down about $1 billion over the past year. Inventories are more than $2 billion higher over that same time, leaving current assets roughly $1.4 billion higher from one year ago. The firm left the entry for goodwill alone, and total assets grew by the same $1.4 billion. Current liabilities increased slightly and are being outpaced by current assets. Long-term debt doubled in a year, but is still not at frightening levels. Total assets still easily total liabilities less equity. The balance sheet is not fortress-like, but is not doubling. The current ratio remains above the 1.0 level that we watch, but with so much merchandise in inventory, the quick ratio is well below levels that I would like to see.
Best Buy expects Q3 enterprise revenue to land in between $11.4 billion and $11.6 billion. Wall Street had been at $10.5 billion on that metric. Full year revenue is being guided toward $51 billion to $52 billion, well above the $49.3 billion that Wall Street was looking for. Comp sales growth for the current quarter is projected to be in a range of flat to -3%, which is higher than previous guidance of a high single digit (percentage) decline. For the full year, expected comp sales growth increases to 9% to 11% from prior guidance of 3% to 6%. The firm still guides full year share repurchases toward $2.5 billion, which is unchanged.
CEO Corie Barry said, "We are reporting record second quarter results today with comparable sales growth of 20% and operating income growth of 40% compared to last year. We are lapping an unusual quarter last year as our stores were limited to curbside service or in-store appointments for roughly half the quarter. When we compare to two years ago, our results are also very strong. Compared to the second quarter of FY20 (for BBY, this is FY22.), revenue is up 24% and our operating income has more than doubled."
Readers will note that as BBY gaps higher on Tuesday morning, that the shares are really still kind of stuck in a basing period of consolidation. Our overbought/oversold indicators are neutral. The daily MACD stands in a string position. However, there is this gap that probably fills at some point, and check this out...
Not only has this stock been range bound of late, but resistance has more or less held firm for a full year. Then, we see all the way back in July of 2020 that there is another still unfilled gap. I know gaps do not necessarily always fill, but they usually do. My opinion? Just for me... buying Best Buy this close to long-term resistance with two unfilled gaps to the south might be unwise.
I have noticed that trading volume is a bit elevated for the November $130 calls valued at around $2.685. If I were so inclined to take down some equity, I probably sell those calls against the position in order to drive down net basis.