Best Buy (BBY 2.49%) is on fire, and I'm not talking about the stores. Its stock has now more than doubled in 2013 -- up 116% on the year, and up 15% on the week -- even though the consumer-electronics retailer's turnaround continues to be a work in progress.
That's not just my inner cynic pecking at the keyboard. Analysts see profitability slipping 17% this fiscal year on a 3% dip in revenue.
The stock has been rallying since a wave of analyst upgrades in February was followed by a better-than-expected holiday-quarter report in March. But let's not mistake surpassing expectations with growth. Best Buy's international operations are a mess. Margins are getting squeezed closer to home. Even the surprising 0.9% increase in domestic comps isn't as good as it may seem at first glance. Best Buy bakes online sales into its same-store-sales metric, so things wouldn't have been so hot if it weren't for Best Buy's 10% year-over-year pop in website sales.
Then again, even that 10% boost in online sales isn't necessarily anything to crow about. Rival Amazon.com (AMZN 4.03%) saw its holiday-quarter sales climb 22%.
Clearly, investors buying in today are more interested in Best Buy's future than in its past, but the news isn't very comforting on that end, either.
Best Buy stock popped higher on Friday on news that the chain will team up with Samsung to open Samsung Experience Stores inside its own stores. The Samsung-manned centers may fare well as an initial novelty, but does anyone remember the last retailer banking on the "store within a store" model to turn things around? Yes, J.C. Penney's (JCPN.Q) Ron Johnson has been busy giving fashion brands their own space to shine in the meandering department stores. The end result has been four consecutive quarters of plunging comps as confused shoppers head elsewhere.
An improving economy can naturally help mask some of the weakness here, but until sales start to improve materially and margins return to form, there isn't even a disguise here to throw us off.
Let Best Buy actually earn these past three months of gains before taking the bait. You're smarter than that.