Best Buy 'Far From Immune' From Coronovirus Disruptions, Says Analyst
Best Buy is “far from immune” from the negative impact of Chinese factory closures due to the coronavirus outbreak’s toll on the global retail supply chain, Wedbush Securities analyst Michael Pachter wrote investors Thursday. Though Best Buy reduced exposure to…
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Section 301 tariffs implemented on electronics imported from China last year -- “as several small and relatively nimble companies moved their US-bound manufacturing to other countries” -- some of its largest partners weren’t able to divert manufacturing from China “and will feel the full brunt of the factory closures.” The retailer can mitigate the impact of supply chain disruption in TVs by pushing 55-inch and larger models manufactured in Mexico, Pachter said. Maintaining a “neutral” rating on the stock, the analyst applauded Best Buy for achieving “difficult financial targets” and setting long-term targets “within the realm of possibility.” Near term, he cautioned of the 2020 supply chain disruption “as Chinese factory closures appear likely to persist through Q1.” Wedbush expects Best Buy to post Q4 revenue next week of $15.19 billion vs. analysts’ consensus of $15.06 billion and the retailer’s guidance of $14.75 billion-$15.15 billion. It expects domestic Q4 comparable sales growth of 2.7% year on year, driven by appliance sales growth through the In-Home Advisor program and services via Total Tech Support. Pachter expects “some growth” in home theater in Q4 because over-55-inch TVs produced in Mexico weren’t subject to tariffs.