Why Did Best Buy Co., Inc. Stock Jump 17% in November?
When a company puts "better-than-expected" in the headline of its earnings release, that's usually a very good sign. Best Buy (NYSE: BBY) did exactly that in its Q3 release, which gives shareholders a reason to cheer.
Image source: YCharts.com.
What happened
Best Buy reported GAAP diluted earnings per share from continuing operations of $0.60, an increase of 62% from $0.37 in the same period last year. The company also saw a slight rise in overall sales, a similarly small uptick in domestic sales, and a 1.8% improvement in domestic same-store sales. Perhaps most importantly, its United States online sales grew by 24%.
Those were encouraging numbers that suggest the company's turnaround efforts, which involve careful cost management, have been effective. Sales have stabilized and turned back to growth, and CEO Hubert Joly's plan seems to be working. That was enough to send its stock from a November 1 opening of $38.93 to a November 30 close of $45.70, a 17.3% change, according to data provided by S&P Global Market Intelligence.
So what
Best Buy has been one of the more stunning comebacks in recent history. The company looked like it would be a casualty of the digital era, but it has fought its way back to relevance under Joly, who took a bit of a victory lap in his remarks in the earnings release:
Now what
These are encouraging numbers, but big-box retailers are judged by Q4, not Q3. Joly seemed to think his company is ready for that challenge:
That's a wordy way for the CEO to say he thinks Q4 will deliver. If that happens, it's probably time to stop talking about Best Buy's comeback and begin focusing on its future growth prospects.
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