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Best Buy Investors Should've Seen This Coming

Rick Munarriz
January 16, 2014

Today's bloodbath in Best Buy (NYSE: BBY) could've been avoided if the market had merely paid attention.

Best Buy posted negative comps during holiday shopping season, and the language of the company's promotional nature to woo shoppers suggests that profitability's taking a hit for the quarter. Why were investors holding out for positive comps? Why were investors holding out for earnings growth? Why were investors holding out for both? It was never going to be possible to succeed on both levels, but now it seems as if Best Buy is failing on both.

There were two big red flags pointing to this morning's Best Buy update as the Red Wedding of the consumer electronics universe.

The first warning sign came last week when all of the publicly traded consumer electronics retailers fell sharply last week after a smaller rival posted horrendous results. Four prolific consumer electronics specialists saw their stocks tumble between 7% and 22% after hhgregg (NYSE: HGG) warned of double-digit declines in its consumer electronics, PC, and wireless categories. Best Buy was the relative winner of the lot, only down 7%. 

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