Market Report -- Short Stories (BBY)
November 19, 2009 9:40 AM ET
Best Buy: Credit Suisse sees better gross margins in the consumer electronics sector . Credit Suisse believes that the consumer electronic sector is set to produce better gross margins than expected due to changes and stronger enforcement of MAP pricing by suppliers and what appears to be less promotional pricing for the Black Friday circulars from the major retailers left in consumer electronics. They note promotional activity remans rational. They also believe certain vendors are increasing their efforts to enforce MAP pricing, a positive for BBY as it competes against AMZN and others. BBY's stock underperformed after both Q1 and Q2, but in Q1 reflecting weaker sales and in Q2 reflecting weaker margins. The co has provided what appears to be cautious guidance heading into 2H. They believe that if sales trends stay consistent with 1H (on a two-year basis), comps could exceed expectations, and combined with signals that gross margins may be better, that could lead to upside to earnings.
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