Sears, Michael Michael, TOM discussed on Bloomberg Surveillance
The Dow Jones industrial average down a quarter percent as well down sixty six points to twenty five thousand nine hundred ninety three and the NASDAQ's down three tenths. Percent or twenty two points. Seventy five twenty seven ten year treasury is down seven thirty seconds. The yield two point six six percent. The yield on the two year two point four nine percent. Nymex crude oil is up two point one percent of a dollar sixteen fifty-six sixty six a barrel. Comex gold down a tenth of a percent on dollar forty two thirteen twenty-seven announced the euro at thirteen ninety the yen one ten point seven five, Tom and Paul Karen. Thank you so much electronics retailer best business. You would think so. But they reported very strong numbers this morning. People are still buying the electronics still like to go into the stores and browse around so best buy good quarter. They beat revenue they beat earnings this quarter. I think they gave a pretty good outlook for the next quarter to stock is up. Tom ten percent in the pre market. So let's dig into the details with Michael Michael is a senior research analyst at Wedbush securities. It joins us on the phone. So Michael what we're pretty good quarter. What are your takeaways from the quarter, actually think you guys are right? They probably eventually are going out of business. But right now, they're the last man standing and a half. Now, if you're on a sinking ship you want the best ship captain and crew that you can possibly get. And they've got it. How it gets it? So many people got this wrong, including me, how did best buy pull the rabbit out of the electron IX at. They've they've done a couple of things one one. The big thing is they've cut over a billion out of their cost structure. So, you know, big chunk of their their cost. Savings has come from. I'm sorry. Their profit growth has come from cost savings. The second thing is they've been super aggressive in buying back shares when who bears league got there. They had four hundred and seventy five million shares. They now have two hundred and seventy five million. So that drives a lot of earnings per share. He's been focusing their free cash flow on cherry purchasing. It smart. They then strategically they made a shift toward appliances. And they're picking up where you know, Sears is losing a tiny share. And they've added services which sounded really dumb to me when they did it. But if you think of best buy as the bastion of the internet incapable, and that's really who they are people who don't know how to the internet go to best buy it. They don't know how to look at TV's on online. They have to see them in person. These guys have value added service. They up sell TV's. They will come in measure, you know, in your house. They'll install the TV or the cook top. And those businesses have really been thriving for them. So Michael from fiscal twenty eleven through fiscal twenty seventeen sales on a pretty consistent downward trend. They seem to turn it around and fiscal eighteen is that just the internet. Got your term was. Capable incapable. They drive it the turnaround. It's that and it's appliances, you know, so appliances have been a big growth category for these guys. And you know, Sears shutting down a ton of stores has really helped and Sears having really bad brand. Now has really helped and where are you going to go? So these guys have done a great job with appliances. The biggest real the biggest switch for them, though, is is in home advisers and very knowledgeable sales staff on the floor, and they cross sell you stuff. They will actually talk to you. When you buy a TV about buying a programmable remote. And of course, you're up a lot. I you don't have to program the remote, they'll come to your house and do it and that drives high margin services, so they're really doing well with those categories, and that's good management. Let me get this out of the way by wholesale right now, how do you readjust after the six year run they've been on? I I haven't neutral after having a cell forever in the sixty. Five dollars price target. So they're right at my target. I would not initiate a position here. One out of businesses here. The thing the best ways allowing us sorry, Amazon's allowing them.