Best Buy's Busted Bad

Watch stocks you care about

The single, easiest way to keep track of all the stocks that matter...

Your own personalized stock watchlist!

It's a 100% FREE Motley Fool service...

Click Here Now

It's official: Best Buy (Nasdaq: BBY  ) is really getting killed in the cutthroat retail environment. Not only do I harbor a very negative stance on Best Buy, I plan to underline that by putting an underperform CAPScall on the electronics retailer's stock later today.

The sheer fact that the beginning of Best Buy's fourth-quarter news release includes a litany of items that are part of its "transformation strategy" should give potential investors chills. That implies the results were really ugly.

Best Buy reported a fourth-quarter loss of $1.7 billion, or $4.89 per share, compared to net income of $651 million, or $1.62 per share, this time last year. Restructuring charges savaged the bottom line.

Revenue increased 3% to $16.6 billion, but same-store sales decreased 2.4% from a 4.7% drop this time last year. Also, the results included an extra week, so the sales increase is far less heartening than it appears. And don't forget, these results reflect the all-important holiday quarter.

Best Buy has obviously reached critical condition. The big-box retailer plans to close 50 of its 1,100 stores and will let go 400 workers in the process. "Transformation" efforts will include opening small-box Best Buy Mobile stand-alone stores.

My colleague Rick Munarriz warned about Best Buy's dismal outlook last week, pointing out that an analyst's "neutral" rating certainly sounded a little too mild under the circumstances. Given today's tidings, indeed.

The common meme these days -- that online retailers like (Nasdaq: AMZN  ) have turned Best Buy into little more than a showroom for customers to look before they purchase at home -- is certainly going around. Things are far more complicated than that, though. At some point, Best Buy lost its roots and with them the hope of bringing something special to the bricks-and-mortar retail experience. That point might have been when former CEO Brad Anderson retired.

Now, Best Buy is just as risky a stock as electronics peddlers Conn's (Nasdaq: CONN  ) , hhgregg (NYSE: HGG  ) , and RadioShack (Nasdaq: RSH  ) . The customer-centricity that used to differentiate Best Buy has been lost, and these days, isn't it just another store?

Although Best Buy now trades at just seven times forward earnings, it's no bargain; the forward multiples of RadioShack, Conn's, and hhgregg (nine, 14, and nine, respectively) simply make those electronics retailers look overpriced.

Right now, Best Buy reminds me of another very sad big-box story: Borders. I suspect more downer news and store closings out of Best Buy in the future. That's why I'm putting an underperform on Best Buy; you can track my CAPS record here. Although retail turnarounds are always possible, once the edge is lost, it's hard to get it back again.

If you're looking for a retail stock with a great growth prognosis, check out our analysts' "The Motley Fool's Top Stock for 2012," available for free now.

Alyce Lomax does not own shares of any of the companies mentioned. The Motley Fool owns shares of RadioShack,, and Best Buy. Motley Fool newsletter services have recommended buying shares of and hhgregg. The Motley Fool has a disclosure policy. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. Try any of our Foolish newsletter services free for 30 days.

Read/Post Comments (0) | Recommend This Article (5)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

Be the first one to comment on this article.

Compare Brokers

Fool Disclosure

Sponsored Links

Leaked: Apple's Next Smart Device
(Warning, it may shock you)
The secret is out... experts are predicting 458 million of these types of devices will be sold per year. 1 hyper-growth company stands to rake in maximum profit - and it's NOT Apple. Show me Apple's new smart gizmo!

DocumentId: 1850591, ~/Articles/ArticleHandler.aspx, 10/23/2016 12:49:21 PM

Report This Comment

Use this area to report a comment that you believe is in violation of the community guidelines. Our team will review the entry and take any appropriate action.

Sending report...

Today's Market

updated 1 day ago Sponsored by:
DOW 18,145.71 -16.64 -0.09%
S&P 500 2,141.16 -0.18 -0.01%
NASD 5,257.40 15.57 0.30%

Create My Watchlist

Go to My Watchlist

You don't seem to be following any stocks yet!

Better investing starts with a watchlist. Now you can create a personalized watchlist and get immediate access to the personalized information you need to make successful investing decisions.

Data delayed up to 5 minutes

Related Tickers

10/21/2016 4:00 PM
AMZN $818.99 Up +8.67 +1.07% CAPS Rating: ****
CONN $9.82 Up +0.04 +0.41%
Conn's CAPS Rating: *
HGG $1.75 Down -0.02 -1.13%
hhgregg CAPS Rating: *