Best Buy (BBY) comparable sales growth lines up pretty well with U.S. GDP these days, as shown below from a chart by Mike Baker, CFA at Deutsche. In our view, you know a company has finally ‘Made It’ once its own sales growth acts as a proxy for U.S. GDP.
Overall, Mr. Baker remains optimistic on the shares, with a Buy and $48 target:
Deutsche: Profit dollar growth accelerating Strength in notebook computers is leading to better than expected sales. While this will cause worse than expected domestic gross margins in 4Q, the higher sales lead to better than expected, and accelerating gross profit dollars… With expense growth still well controlled, this leads to accelerating EBIT profit growth.
[image url="http://static.businessinsider.com/image/4b2a5c4d0000000000df7d6c/image.jpg" link="lightbox" caption="" source="" alt="BBY" align="left" size="xlarge" nocrop="true" clear="true"]
Of course, we should take the above correlation with a grain of salt. One reason is that, as again shown by one of Mr. Baker’s charts, Best Buy has been growing comparable sales faster than the industry.
Thus the company is taking market share, which means its own sales growth data may present a slightly exaggerated view of the U.S. economy right now. This is because it includes both industry growth and market share growth, rather than just industry growth alone. Yet it’s great news for Best Buy’s future dominance.
[image url="http://static.businessinsider.com/image/4b2a5c780000000000704b02/image.jpg" link="lightbox" caption="" source="" alt="BBY" align="left" size="xlarge" nocrop="true" clear="true"]
(Charts via Deutsche Bank, Mike Baker, CFA, “Taking Share While Growing Earnings”, 15 December 2009)
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