Sales Decline And Margin Compression To Ail Best Buy's Q1 Earnings: Analyst Highlights Challenges

Telsey Advisory Group analyst Joseph Feldman maintained a Market Perform rating on Best Buy Co., Inc. BBY with a price target of $81. Best Buy will release its first quarter results on May 25.
Feldman expects the quarterly results to see sales decline and margin compressions, primarily dragged by challenging macro trends in recent times.
Overall weakness in the economy is likely to weigh on discretionary consumer demand amid high inflation and rising interest rates, the analyst notes.
Given the above factors, the analyst estimates a sales decline of (10.1%) in 1Q to $9.6 billion. 1Q EPS is expected to be $1.24, down (20.8%) Y/Y.
By segment, the analyst expects Domestic revenues to fall (10%) Y/Y, while International revenues are expected to decline at (7.0%).
In the last reported fourth quarter, Domestic revenue decreased 9.8% Y/Y, and International revenue fell 12.2%. Enterprise comparable sales decreased by 9.3%.
In the quarter to be reported, Feldman sees an operating margin contraction of ~90 bps to 3.7%.
Helping offset tough comparisons, Best Buy should benefit from new categories, digital, and solid execution, the analyst adds.
The analyst sees Best Buy as one of the better operators in retail in the long term.
Feldman says the company will gain particularly from efficient operations, solid cash flow generation, and a strong management team.
Price Action: BBY shares are trading lower by 3.29% to $70.64 on Friday's last check.
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