Best Buy's net income, comps see dismal drop in Q2

Gross profit actually was higher in Q2 (although the cost of goods sold rose, too), but the increase in SG&A pulled operating profit down. I mention these issues because I'm sure you might have been wondering why the bottom line went down so significantly when the top line appeared so cool.

Of course, I think the best metric to look at when it comes to a retailer is the one devoted to same-store sales. That cuts through a lot of elements and goes to the heart of the story. I'm afraid investors won't be pleased to know that comps fell by 3.9% during the quarter. This is a salient point of consideration for any proper evaluation of Best Buy. Management needs to address this poor performance.

Shares of Best Buy sold off yesterday by over 5% on heavy volume. Even though it was an up day for the markets at large, Wall Street wasn't happy that the company missed estimates of 42 cents per share, according to our earnings preview.

Here's how I feel about Best Buy's stock at this moment in time: We're coming up to the big Christmas rush. The competition will be fierce. The electronics departments at Wal-Mart (NYSE: WMT) and Target (NYSE: TGT) will be taking aim at Best Buy. Equity prices have already had a huge run. Best Buy itself has had a decent run this year. Processing all of this, I will call Best Buy a hold. No, I wouldn't want to start a position, but I also wouldn't sell out just yet, either.

With all of the positive headlines lately about the recession possibly heading toward an end, my sense is that the retailer could still benefit from the bullish sentiment that is out there. However, if you're holding a profitable position in the stock, I would not blame you whatsoever from locking in profits. Taking some off the table would in no way make you a coward.

Disclosure: I don't own any company mentioned; positions can change without notice.