Jefferies On Best Buy: 'Strong Execution Against Tough Backdrop'

In a report published Friday, Jefferies analysts maintained a Buy rating on

, while raising the price target from $46 to $49, saying that the company's execution was strong against a challenging backdrop. Best Buy reported its Q1 EPS at $0.37, ahead of the Street estimate of $0.29. Domestic SSS grew by 0.6 percent, beating the Street expectation of a decline of 0.2 percent. "BBY saw strong performance in mobile phones, TVs (consumer electronics +7.6%), and appliances (+12.4% comp). This was despite port issues which affected competitors and a slowdown in industry appliance shipments," the analysts said. Best Buy has reduced its Q2 EBIT% guidance to 50 bps, since it continues to invest in its website, the BBY mobile app, a new labor model, Pacific Sales system integration, appliance delivery and installment, personalization in marketing, gift centers online, and supply chain. "We believe some investments such as the new labor model are already providing a payback, but we should see continued returns on investment as we get into 2H," the report mentioned. Best Buy reported online sales growth of only 5.2 percent. The analysts expect the company's online performance to improve, with the gaming console already launched and new product introductions expected in computing this summer. In the report Jefferies noted, "BBY's market position has improved, shifting from stabilizing the business to playing offense as large pools of market share are up for grabs. Strong inventory management around port issues and good in-store execution of its new labor model translated to better than expected sales, which outpaced competitors." "Mgmt is investing in areas of the business that should add structural advantages and allow it to compete beyond price," the analysts added.