Morningstar Rating

Stock Research and Analysis

by R.J. Hottovy, CFA

Bulls Say

An expansive product assortment and service offerings help to differentiate Best Buy from mass merchants and online retailers.
The firm has cut $765 million from its annual cost structure through space redesign efforts, cost of goods sold optimization, and SG&A reductions, and now targets more than $200 million in additional cost reductions through reduced returns/replacements/damages as well as logistics and supply chain enhancements.
Best Buy has re-engineered its online platform, improving the user experience and facilitating greater ship-from-store fulfillment capabilities. Read more 

Bears Say

Mass merchants, warehouse clubs, online retailers, and consumer product OEMs are all vying for market share, leading to increased price competition and limiting longer-term margin expansion opportunities.
Entertainment software sales will continue to shrink over the long run. Replacement categories will likely be slower-turning, lower-margin categories.
Warranty sales have historically been a disproportionate contributor to margins. If consumers gravitate to rival consumer electronics retailers for big-ticket items, there could be a profitability hit from the lost warranty sales. Read more 

Management

Following a formal search process, the company appointed Hubert Joly as president and CEO in August 2012, and named him to the board. Before accepting the Best Buy CEO role, Joly most recently was CEO of hospitality/travel company Carlson and also held   Read more 

Profile

Best Buy is the largest U.S. consumer electronics retailer, with 16% of the $203 billion market expected in fiscal 2014 (using estimates from the Consumer Electronics Association).  Read more 

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