Macquarie Research, – Japan Implications of Best Buy results

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MacqTech Express – Japan
Implications of Best Buy results
Event
 Best Buy (BBY US, NR) overnight released weak FY4Q11 results ended
February. US SSS (same store sales) declined 6% YoY, and CE SSS and
Entertainment sales declined 7% and 14% YoY respectively. The trend is
largely similar to the previous quarter that saw lower demand in BBY’s key
categories such as TVs and notebook PC, and market share loss in game.
Impact
 TV sales weak. We assume weak TV sales were due to the continued
unfavourable trend for BBY, as demand for IPTV and 3D TV was lower than
expected. We also assume the ongoing trend from the previous quarter was
unavoidable, because global brands such as Sony did not launch 2011 TV
models in January/February.
 Notebook sales weak, partially offset by mobile phone increase. Similar
to the previous quarter, management indicated that NB sales declined YoY due
to higher base resulting from the Windows 7 launch last year. Also, it highlighted
the SSS increase in mobile phones, driven by an increase in smartphone.
 BBY’s FY12 outlook. In terms of FY12 outlook, BBY does not foresee a
particularly exciting environment for TV, but sees growing opportunities in
categories such as mobile, appliances, and game.
Outlook
 BBY’s moderate outlook for TV sales in the US does not come to us as
surprise, as we estimate a mere 3% US TV shipment growth in 2011. Our
checks indicate overall US TV inventory has been digested since December
and global TV makers are launching or planning to launch 2011 TV models in
March/April. On that note, we continue to expect a recovery in TFT-LCD sales
in 1H11. We prefer Samsung among TV brands, and like AUO and LGD
among panel makers, and Coretronic, Radiant, AGC/NEG and Nitto Denko in
the LCD supply chain.
 While BBY’s intention to grow in game is likely to be driven by companyspecific
reasons as it plans to grow the game business through a new
strategy, we are also positive on Nintendo and its DS launch.