Retailer Best Buy (NYSE:BBY) is stuck in a downtrend as markets fear higher product costs will hurt demand. Yet the second-quarter results demonstrated continued strength and steady performance ahead.
Best Buy reported Q2 non-GAAP EPS of $1.08. Revenue grew 1.7% to $9.54 billion. The company reported a 1.9% comparable-store sales increase while domestic gross margin topped 24%. But even though higher supply chain costs worried investors, the company still reported an operating margin of 4%, above the 3.7% consensus.
With the $0.50 quarterly dividend declared, the stock yields around 3%. So, if the stock trends lower because of worries over China/U.S. trading, investors get paid to wait. Suppliers are migrating their manufacturing out of China to minimize costs and risks. This will add to the near-term volatility and product pricing but should adjust favorably in the medium term.
Looking ahead, Best Buy raised its non-GAAP guidance range. The outlook already factors List 4 tariffs and the most recent List 3 tariffs at 30%. Best Buy is unfazed over the exciting product mix ahead. It believes the launch of such products as a new collection of fitness products, connected bikes, and re-jigging the stores to showcase fitness will attract foot traffic.
Takeaway
Best Buy shares are inexpensive. Although the stock may fall further, it will eventually bottom. Investors should consider accumulating shares steadily.
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