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3 Retail Turnarounds That Are Still a Mess

JCP, BBY and SHLD are supposed to be on the mend, but recent reports weren't promising

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BBY: Best Buy Earnings Send Stock Slipping

bby-stock-best-buy-earningsThe good news: Best Buy earnings for Q3 were a little more encouraging than the JCPenney earnings numbers. The bad news: That relative success didn’t have the same positive impact on BBY stock that JCP stock experienced. In fact, Best Buy stock slumped 11% following its Tuesday morning announcement.

All told, Best Buy earnings were a drastic improvement, with EPS going from a loss of 3 cents per share in Q3 of 2012 to a profit of 16 cents per share last quarter. The results handily topped estimates for an EPS of 13 cents per share of BBY stock.

So why did shares of Best Buy stock tank? It may have had something to do with stagnant revenue. Sales of $9.36 billion were right in line with the top line from the same quarter a year earlier, and a tad short of the $9.37 billion in sales that analysts were expecting for Q3. Perhaps also working against BBY stock was the fact that shares had rallied 286% this year up until the point when the Best Buy earnings numbers were released. That suggests the market had enormous growth expectations. So BBY stock could have fallen even with significant sales growth for the third quarter.

More than anything, though, investors need to be wary of shrinking gross margins in future Best Buy earnings reports, as the company contends with more and more competition. Gross margins fell 60 basis points in Q3, and they could slide as much as 90 basis points in the fourth quarter as BBY aims to win business in the all-important holiday shopping season.

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