Best Buy investors see better times ahead
The retailer's shares are up even as the founder mulls scrapping his takeover offer.
According to The Wall Street Journal, Schulze, Best Buy's largest shareholder, now is trying to persuade investors to take a minority interest in the Richfield, Minn., company. He has until the end of the month to make a bid for Best Buy, a deadline which the company has already extended. It isn't clear which option Schulze will pursue.
Schulze quit the company after his protégé, Brian Dunn, was forced to resign as CEO after news emerged that he was having an inappropriate relationship with a female employee. Schulze came under fire because he knew about the affair but failed to notify the rest of the board. Regaining control of Best Buy would certainly be a personal vindication for him.
Best Buy shares rose more than 6% Thursday to $16.09 as investors bet that all hope was not lost for the big-box retailer. The shares have been on a tear this year, gaining more than 34% after the company reported a holiday season that wasn't as dismal as Wall Street had feared. Wall Street analysts, though, believe the stock price is ahead of itself. Their average 52-week target is $13.57.
CEO Hubert Joly has been combating "showrooming" -- the consumer tendency to look at merchandise at brick-and-mortar stores only to make purchases online at lower prices. During the holiday season, he introduced a policy where Best Buy would match the prices of rivals such as Amazon.com (AMZN). This yielded some positive results.
During the holiday period, online sales surged 10% to $1.1 billion. Unfortunately, comparable-store sales, a key metric of performance at stores open at least a year, were flat. While that was better than what Wall Street had feared, it still highlights the Herculean challenges ahead for Best Buy.
--Jonathan Berr does not own shares of the listed stocks. Follow him on Twitter @jdberr.
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Equities climbed steadily since the opening bell as investors prepared for tomorrow's policy decision from the Federal Reserve. Although chatter in recent weeks has included speculation the Fed would look to taper its asset purchases, today's broad gains suggest investors expect mostly reassuring words from Chairman Bernanke at tomorrow's press conference.
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