Track the companies that matter to you. It's FREE! Click one of these fan favorites to get started: Apple; Google; Ford.



Maybe Best Buy Isn't Dead After All

Many analysts, myself included, assumed that Best Buy (NYSE: BBY  ) was as good as dead at the end of last year. Over the previous 12 months, its stock had lost half its value. A new CEO with scant retail experience was at the helm. And its founder was mounting an ultimately fruitless attempt to take the company private after being ousted from the board for failing to act upon the sexual indiscretions of a former CEO.

But the new year brought a new lease on life, and Best Buy has done everything in its power to capitalize on the opportunity. As the following chart shows, its stock has mounted an impressive rally since the beginning of January, more than doubling in value and thereby making it the top performing stock this year on the S&P 500 (SNPINDEX: ^GSPC  ) .

BBY Chart

BBY data by YCharts

If you examine the price movements, you can see three distinct catalysts. The first came at the end of January, with the release of Best Buy's holiday sales numbers. For the last two months of the year, it reported essentially flat sales at its U.S. stores open at least 14 months. While that might not seem great, it nevertheless outperformed analyst expectations in light of the fact that its same-store sales had fallen for most of the preceding three years. On the heels of the announcement, shares in the company soared by 16.4%, its biggest single-day percentage gain in more than four years.

Roughly a month later, Best Buy one-upped itself by reporting better-than-expected fourth-quarter earnings. Even though it lost $409 million during the three-month period ended Feb. 2, the end result represented a dramatic improvement from the same time period the previous year, in which it lost $1.82 billion. And on top of this, it notched its first quarterly gain in comparable sales in more than a year. As its CEO, Hubert Joly, said at the time, "People who thought we were dead have to go through the painful process of revisiting that point of view."

And the final catalyst came at the beginning of April, with the announcement that it's partnered up with the South Korean electronics giant Samsung to install semi-autonomous boutiques featuring the latter's increasingly popular products. As The Wall Street Journal noted, "Best Buy has figured out what to do with some of the empty space in its cavernous stores: Turn it over to Samsung." The hope here is that the new stores will drive more traffic through Best Buy's stores, which can then be converted into sales. While I'm skeptical, and particularly of Samsung's decision to partner with an ailing bricks-and-mortar operation as opposed to just going it alone like Apple, even I can't deny the promise offered by this arrangement.

It still remains to be seen, of course, whether Best Buy can mount a sustainable recovery in the face of competition from online retailers and the growing digitization of its formerly lucrative music and DVD businesses. But one thing's for certain: It's certainly making a showing for the time being.

The Motley Fool's top stock for 2013
The Motley Fool's chief investment officer has selected his No. 1 stock for this year. Find out which stock it is in the special free report: "The Motley Fool's Top Stock for 2013." Just click here to access the report and find out the name of this under-the-radar company.

Read/Post Comments (1) | Recommend This Article (3)

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.

  • Report this Comment On June 30, 2013, at 3:10 PM, kojak200 wrote:

    This is a retailer that will die the slow long death aka Sears. Just a bad business model. Stores are becoming confusing and the blue shirt identity is lost as more kiosks are added. What do we have so far, Samsung, Microsoft, Apple, Sony, Magnolia, Pacific Sales, Mobile and more to come I'm sure. Good short term investment but don't see negative sales trends changing without a major technology update in several of its core businesses.

Add your comment.

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: 2517042, ~/Articles/ArticleHandler.aspx, 9/30/2016 11:41:13 AM

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 Moments ago Sponsored by:
DOW 18,331.23 187.78 1.03%
S&P 500 2,170.58 19.45 0.90%
NASD 5,311.17 42.01 0.80%

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

9/30/2016 11:24 AM
BBY $37.96 Up +0.55 +1.47%
Best Buy CAPS Rating: *
^GSPC $2170.58 Up +19.45 +0.90%
S&P 500 INDEX CAPS Rating: No stars