Best Buy Co. Inc.BBY

Morningstar Rating

Stock Research and Analysis

by R. J. Hottovy, CFA

Best Buy is the dominant pure-play consumer electronics specialty retailer, controlling approximately 6% of the $700 billion global marketplace. However, we believe the fall of Circuit City and other industry participants will invite increased competition Read more

Bulls Say

Best Buy's expansive product assortment and increased service offerings help to differentiate it from mass merchants and online retailers, which compete largely on price.

The firm has ample international growth prospects. The consumer electronics retail category is highly fragmented in several international markets, which should facilitate market share gains.

A customer-centric store design allows the firm to capture higher-margin customers by tailoring products and services to local market demographics.

There are more than 26 million Best Buy Rewards Zone members, which has become an effective tool to fine-tune marketing communications. Read more

Bears Say

Mass merchants, warehouse clubs, and online retailers are all vying for consumer electronics market share, likely limiting margin expansion opportunities.

Macroeconomic cyclicality impacts spending on consumer electronics. A still sluggish housing market could hurt sales of appliances and home audio systems.

With the increasing prevalence of digital distribution, we expect sales of the entertainment software category will shrink over the long run.

Best Buy failed to turn around Musicland after it acquired the troubled music store in 2001. Recent acquisitions may hurt profitability and divert management's attention. Read more

Strategy

Best Buy is focused on growing its market share in the U.S. and abroad through continued unit growth and greater category penetration. The firm also plans to differentiate its shopping experience with Read more

Management

Best Buy boasts a seasoned management team with sound corporate governance practices. Brian Dunn assumed the role of CEO in June 2009 after spending 23 years with the firm in various leadership capacities. Dunn replaced Brad Anderson, who will serve Read more

Profile

Best Buy is the largest consumer electronics retailer in the U.S., with about 20% of the $170 billion market. With the 2009 acquisition of 50% of Carphone Warehouse's retail Read more

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