Why Best Buy Shares Plunged

Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis.

What: Shares of embattled electronics retailer Best Buy (NYSE: BBY  ) sank 12% in early trading today after its quarterly results and guidance disappointed Wall Street yet again.

So what: Best Buy unveiled a plan last week to improve returns and cut costs, but today's wide third-quarter miss -- adjusted EPS of $0.03 versus the consensus of $0.13 -- coupled with downbeat guidance for 2013 suggests that the task will be a lot tougher than expected. In fact, same-store sales fell 4.3%, reinforcing concerns that consumers continue to use the stores as showrooms for online purchases from the likes of Amazon (Nasdaq: AMZN  ) or eBay (Nasdaq: EBAY  ) .

Now what: For the full-year 2013, management now expects free cash flow of $850 million-$1.05 billion, which is down significantly from its prior view of $1.25 billion-$1.5 billion.

"On November 13, we shared our candid assessment of Best Buy's situation and unveiled Renew Blue, a set of priorities to begin reinvigorating the company's performance and rejuvenating Best Buy," said CEO Hubert Joly. "The results we are reporting today only strengthen our sense of urgency and purpose."

Given the gale-force competitive headwinds facing Best Buy, however, even the most brilliant strategic moves might not be enough to regain footing.

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