This morning Best Buy (BBY) reported their Q1 2010 results and the data was simply terrible. Why was it terrible?
Best Buy Co Inc (BBY) Reports Q1 $0.36 v $0.50 expected EPS, Revenue $10.8B v $11B expected
First was sales revenue has flattened, no growth. The second reason is hidden within the EPS reported today. Wall Street was ‘expecting’ an EPS of $0.50 for the Q1, instead what Best Buy reported was $0.36 which is a fairly significant miss. But what does that miss suggest? It says that Best Buy increased their overhead costs (employees) in anticipation of consumers returning in droves. The only problem was that the consumers did not return in droves, which hit the EPS hard due to Best Buy ramping up their internal costs by bringing back some employees which is the most expensive part of any companies overhead costs.
Will the decline in retail sales that has been evident over the past several months mean Best Buy will have to go back to cost cutting (dropping employees again), or will they eat the costs in hopes the consumers will return in droves one day soon? It may be a long and lonely summer for Best Buy if they are going to hang on to that hope.
Have market analysts been doing you any favors? Following the Q4 earnings release on March 29 there have been 7 upgrades to buy and/or price targets being raised, and only 2 downgrades. Long time readers of my site already know my view of Wall Street analysts, so I will withhold my commentary on the ridiculous upgrades ahead of the poor earnings release this morning. I imagine there are plenty of investors who are none to happy right now.
Shares of Best Buy dropped just over 6% today on the disappointing earnings.

sharply in February. Concerns about current business conditions and the job market pushed the Present Situation Index down to its lowest level in 27 years (Feb. 1983, 17.5). Consumers’ short-term outlook also took a turn for the worse, with fewer consumers anticipating an improvement in business conditions and the job market over the next six months. Consumers also remain extremely pessimistic about their income prospects. This combination of earnings and job anxieties is likely to continue to curb spending." […] 