Best Buy Still Has No Future

The following video is part of our "Motley Fool Conversations" series, in which chief technology officer Jeremy Phillips and senior technology analyst Eric Bleeker discuss topics across the investing world.

Best Buy just released same-store comps that declined more than 5% year over year, and investors... cheered? That's just another sad saga in the continuing decline of this once-proud electronics retailer. Eric and Jeremy discuss why Best Buy continues to look like a turnaround with no end in sight, except eventual bankruptcy. The company's model is put under more pressure than other retailers from e-commerce sales, it has compromised its store experience trying to chase opportunities, and it has few advantages over retail stores.

It's easy to see why Best Buy wants to get into mobile; it's become the greatest technology revolution ever! There will likely be three times as many smartphones and tablets sold as PCs in 2015. Yet while Best Buy has struggled breaking into this market, there's a world of opportunity. To help investors better profit form this trend, The Motley Fool has just released a free report on mobile called "The Next Trillion-Dollar Revolution" that details a hidden component play inside mobile phones that also is a leader in the exploding Chinese market. Inside the report, we not only describe why the mobile revolution will dwarf any other technology revolution seen before it, but we also name the company at the forefront of the trend. Hundreds of thousands have requested access to previous reports, and you can access this new report today by clicking here -- it's free.

Eric Bleeker has no positions in the stocks mentioned above. Jeremy Phillips has no positions in the stocks mentioned above. The Motley Fool owns shares of Apple, Amazon.com, and Best Buy. Motley Fool newsletter services recommend Amazon.com and Apple. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.


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

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  • Report this Comment On May 28, 2012, at 9:01 PM, applefan1 wrote:

    So, what PC companies have an physical store to go to should Best Buy go Bye Bye? Is the return of the computer stores? I certainly don't see department stores like Sears successfully selling and supporting computers. Microsoft still only has 20 locations up and running. Appliances like vacuum cleaners refrigerators/washers/dryers are sold through Department stores and specialty stores. Stereo equipment is sold through independent stereo stores, phones sold through phone stores, CDs/DVDs are sold on line or digital download. So what is left? WalMart isn't exactly the place I would buy a computer from. Most or all of the retail computer/electronics superstores are gone. So what's left? Amazon? A lot of people still need to see the products in person and need a sales person/support people doing hand holding. Apple has their 400 or so stores and growing, but these PC mfg don't have their respective store set up.

  • Report this Comment On May 28, 2012, at 9:04 PM, applefan1 wrote:

    $50 cables through a company like Monster don't cost Best Buy $3. The only value add Best Buy does is sell support contracts, delivery on the TVs, which is where they make money.

  • Report this Comment On May 28, 2012, at 9:55 PM, Risky88 wrote:

    right on guys

  • Report this Comment On May 28, 2012, at 10:01 PM, TMFRhino wrote:

    Hey applefan1,

    I used to work at Best Buy which meant you got cost +5% on any item. My favorite part of the job quickly became scanning up every item I could to know what the mark-up was... I'll say, the Monster stuff still has a heady mark-up. If memory servers me right, a $30-ish cable would sell for $70 and up.

    Of course the REAL profits came from their self branded lines like Dynex... Man, those things sometimes had like a 3,000% mark-up. So... Yeah, a $30/$40 cable would literally cost a couple bucks. Its a tough racket to have disrupted... Because it is crazy lucrative.

    Thanks for watching,

    Eric

  • Report this Comment On May 28, 2012, at 11:10 PM, thesmartestfool wrote:

    The market "cheered" because not everyone in the market realized that the earnings beat and increase in overall revenue were driven by an extra week in the reporting period, a lower tax rate, and a reduction in shares.

    Without that extra week, BBY would've reported a drop in overall revenue. Without the additional week, lower tax rate, and reduction in shares, I'm not sure BBY "beats" the forecast.

    These additional factors were only mentioned as afterthoughts and to date I haven't seen anyone do a hard analysis on what the numbers would have looked like...it would be interesting to see what the numbers really were...

    Great topic for your next article maybe?

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