Best Buy stock soars 125% in 3Q, leads Discount Store Index - Best Buy Superstores Inc

Discount Store News, Oct 18, 1993 by Neil Nordby

Best Buy continued its upward trajectory during the third quarter just ended, taking the Discount Store News Stock Index along for the ride.

In fact, Best Buy was the best performing stock on the New York Stock Exchange for the latest three-month period, as it sprinted ahead a whopping $28.80 a share (adjusted for a three-for-two stock split), or 125%, before finally coming to rest at a record high of $51.88.

The result of Best Buy's resounding performance was a rebound in the Discount Store News Stock Index, which fell under the weight of sell orders in the second quarter when adverse weather conditions and the nation's anemic economy kept shoppers at bay. That was then and this is now. This time around, the DSN Stock Index turned in a respectable 59.31-point, 2.44% rally en route to a close of 2491.54. Our index of 85 stocks outpaced the Dow Jones Industrial Average (up 1.11%) and the S&P 500 (up 1.86%), but did not fare as well as the NYSE Composite (up 2.46%) or the NASDAQ Composite (up a sturdy 8.36%).

As mentioned, Best Buy topped the leaderboard last quarter. The reason: the Minneapolis-based electronics and appliance retailer shattered Wall Street's earnings estimates when it posted a second-quarter profit of $7.6 million. The results were up nearly three-fold from year-ago profits of $2.6 million and bested the average Wall Street estimate by more than 67%. Same store sales swelled 27% while total sales nearly doubled to $563 million. Best Buy closed the trading stanza at a new 52-week high of $48.38.

Dress Barn, in contrast, stood by as investors took an axe to its share price last quarter. the company disappointed Wall Street when it posted a 1% decline in July same store sales. Dress Barn did not put these concerns to rest when August's same store sales rose 1%. At the time of this writing, however, the Stamford, Conn.-based retailer posted a 19% gain in sales to $121 million and a 16% increase in profits to $6.7 million. Same store sales for the quarter were flat.

Dress Barn plans to open 104 stores during this fiscal year.

Rose's Stores was the biggest casualty of the lot last quarter, as its Class A shares plummeted over 80% to $1.06. The retailer, which filed Chapter 11 Sept. 5, received preliminary approval from a U.S. Bankruptcy Court for a financing plan that will allow it to run its business under Chapter 11.

Back to the winning side of the ledger last quarter:

Men's Wearhouse pleased shareholders where it counts the most last quarter: in their pockets. The result: the company chalked up a 63% gain en route to a record high of $27.25. The reason: The San Francisco-based retailer continued its aggressive expansion plans last quarter while the men's tailored clothing market continued to contract. The company, which opened 31 stores in 1992, plans to have 500 units in operation by the turn of the century. The residue of its growth strategy: earnings for the six-month period ended July 31 rose to $2.5 million from $1.7 million in the same stanza one year prior.

PETsMART was also popular on Wall Street last quarter, rising a robust 41% to $35.25. Like Men's Wearhouse, its expansion plans paid off at its bottom line. PETsMART, which has 75 stores in 13 states, said it hopes to have 106 stores in operation by the end of 1993.

Tuesday Morning followed suit, as it notched an invigorating gain of 47% before closing out the quarter at $13.25. FMR Corp., an investment fund manager based in Boston, increased its equity stake in the retailer to 6.07% of Tuesday Morning's total shares outstanding. FMR bought 186,600 shares worth about $22 million between July 19 and Aug. 31.

                       Major Indexes
                      Close     Close     Net     Percent
                     9/20/93   10/4/93   Change   Change
Discount Store       2454.82   2558.23   103.41    4.21
Dow Jones            3575.80   3577.76     1.96    0.05
Standard & Poor's     455.05    461.34     6.29    1.38
N.Y.S.E. Composite    252.77    256.35     3.58    1.42
NASDAQ Composite      740.21    764.84    24.63    3.33
Value Line Index      283.99    288.67     4.68    1.65
  Source: Nordby International Inc., Louisville, Colo.

[TABULAR DATA OMITTED]