Best Buy’s Comeback: Real Or a Mirage?

Finally, some really good retail news! Yesterday, Best Buy’s stock set an all-time high. What does that signify — a long-term comeback for Best Buy or a short-term mirage? Let’s begin with some background.

As with many mostly store-driven retailers, consumer electronics giant Best Buy has certainly seen its share of ups and downs over the past several years due to competition from Internet retailers and other factors. This is clear from the following Morningstar chart. [Click the chart for a larger version.]


 
So, why the big stock price bump yesterday? It seems to be largely due to Best Buy’s exceeding the low expectations for its ongoing performance.

As reported by Khadeeja Safdar for the Wall Street Journal:

Best Buy [click to get a current stock price quote], the electronics giant left for dead a few years ago, is bucking America’s retail slump by turning its cavernous stores from a potential drag on its business into a way to fend off Amazon.com. The company Thursday reported a slight increase in quarterly revenue, surprising investors who were bracing for a decline. Online sales jumped 23% in the U.S. from a year ago, accounting for $1 billion of business in the quarter and offsetting in-store declines.’ Yet, some investors remain skeptical.”

“While Best Buy has closed a dozen large stores and 40 smaller ones during the past year, it continues to operate 1,600 locations in North America and is increasingly able to use them to build up E-commerce business. About half of its online orders are now either shipped or picked up from its stores. ‘The stores continue to be a great asset for us,’ Best Buy CEO Hubert Joly said Thursday. ‘They’re a great asset for the customer experience on the more complex categories or experiences, and they’re a great asset from a shipping and logistics standpoint.’”

 

Click the image to read more of Safdar’s reporting.

This entry was posted in Part 2: Ownership, Strategy Mix, Online, Nontraditional, Part 3: Targeting Customers and Gathering Information, Part 5: Managing a Retail Business, Part 6: Merchandise Management and Pricing, Part 7: Communicating with the Customer, Part 8: Putting It All Together and tagged , , , , . Bookmark the permalink.

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