Diamonds and Dogs

8/23/16

Best Buy (BBY) is back. The largest U.S. electronics retailer rose 18%, the stock's best single-day gain since 2001,  to a new 52 week high thanks to better than expected earnings. Best Buy profits were up 16% to 57 cents per share, while total revenue rose 0.1% to $8.5 billion. Both figures topped Street estimates. The higher than expected sales were driven by wearable devices, computers and 4K television sets, which offset declines in smartphones and gaming. Online sales, bolstered by increased traffic and higher average order value jumped 24%. Maybe people were buying new TVs for the Olympics.

Zoes Kitchen (ZOES) added to the list of struggling restauranteurs. Zoes stock dropped 18% back to the February lows following earnings. The earnings were actually better than expected as revenue rose 21.7% year over year to $66.3 million. Comparable restaurant sales increased 4.0% while restaurant contribution margins increased 40 basis points to 21.7%. The disappointment came with downside guidance for the year lowering sales to $277-280 million vs. $280.64 million consensus. The company will continue to execute on their development plans, opening nine new Zoe's Kitchen locations during the second quarter and add another five locations in the third quarter with 25 new locations opened year-to-date on track to open 35 to 36 restaurants for 2016.