Earlier this week, electronics retailing giant Best Buy
Best Buy's performance continues to be especially impressive, given that archrival Circuit City
Best Buy's diversification allows investors to benefit from popular products without having to risk picking the wrong underlying supplier. For example, few would have predicted that Nintendo's Wii would become a top seller ahead of Microsoft's
In terms of growth potential, there appears to be plenty of international real estate to expand into, and Best Buy has started moving to China to spearhead overseas ambitions. Chinese sales are proving less profitable than those here at home, but will likely be relied on for growth since domestic trends will slow at some point.
Despite the wide array of merchandise, sales can be volatile in consumer electronics. Products such as high-definition TVs can sell well, but intense competition and a high number of suppliers have caused prices to fall quickly. This benefits consumers, but can make it difficult for Best Buy to predict profitability trends. Fortunately, the company generates prodigious amounts of capital, and it was able to reduce shares outstanding by about 7% to help offset what it sees as a "challenging consumer environment" for at least the foreseeable future.
Circuit City's woes and a recent bankruptcy filing by regional player Tweeter demonstrate just how dominant Best Buy has grown in electronics retailing. Best Buy's future looks bright, and investors can rest easier regarding the near-term outlook after this week's favorable developments.
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Fool contributor Ryan Fuhrmann is long shares of Microsoft, but has no financial interest in any other company mentioned. Feel free to email him with feedback or to discuss any companies mentioned further. The Fool has an ironclad disclosure policy.