Best Buy can't go on like this
The retailer's earnings are even more dismal than Wall Street had feared. Shares tumble 12%.
Best Buy (BBY) better hope that founder Richard Schulze and his private equity partners go through with their plans to buy the embattled consumer electronics retailer, whose future otherwise appears bleak.The headline on the company's earnings release today says it all: "Best Buy Confirms Significant Decline in Fiscal Third Quarter 2013 Earnings."
Shares of Best Buy, which have slumped more than 48% this year, not surprisingly plunged 12% in early trading Tuesday.
CEO Hubert Joly, who was named to the job in August, seems to have a firm grasp on the retailer's many problems which, to his credit, he isn't sugar-coating. In fact, he is quoted in the release as describing the company's financial performance as "clearly unsatisfactory." His candor is no doubt welcome by Best Buy's beleaguered investors.
But the odds of Joly succeeding are slim. In an interview with Bloomberg News, he lamented the fact that Best Buy lacked the connection with consumers that Apple (AAPL) and Amazon (AMZN) seem to enjoy. He also is trying to boost the company's lackluster online sales by vowing to match prices of Amazon and other rivals. It's a risky strategy, but given Best Buy's precarious state, one that Joly has little choice but to follow.
Unfortunately, the retailer is being forced to increasingly compete on price instead of service. There is so much information available to consumers online that many don't need a Best But expert clothed in a blue golf shirt to advise them on what to purchase. Best Buy's stores are also cavernous and often crowded on the weekends, which makes them unpleasant places to shop. Many of the people that you see in the stores are "show-rooming" -- checking out products in the company's bricks-and-mortar stores that they will later buy online at a much cheaper price. That is a growing problem.
Time is not on Best Buy's side, particularly as it heads into the important holiday season. Wall Street will want to see some signs of improvement, tiny as they may be, or else Joly's job could be in jeopardy. Schulze and his partners will also demand better performance if they are able to finalize their plans to make an offer. If that happens, the founder should keep Joly as CEO because he seems to have a firm grasp on the retailer's problems. All Joly needs is the time -- and money -- to fix them, which is easier said than done.
Jonathan Berr does not own shares of the listed stocks. Follow him on Twitter@jdberr.
Best Buy offered a refurbished HP laptop computer for a good price, but they did not offer and refused to offer a warranty other than 90 days parts. No warranty no deal.
The Deal of the Day: Try to purchase more than one of small low cost items; for example, flash drives. I wanted three but they would only sell one per order.
In addition, I have traveled the 80 mile trip 4 times and the item they advertised for sale was not available. Best Buy, I think not.
Like FDR did 30+ years ago, we need laws on how big business does business, like product support for X number years. The most decimated part of the work force is the repair services. Though prices for items may have gone down a little, very few items bought today are repairable and if repairable parts are not available. Canada and most of Europe have laws that if you manufacture and or sell a product there you have to make it serviceable and parts available for a number of years depending on what it is. They can't sell all support rights to another Company. We need consumer protections for the products we buy.
Best Buy knowledge about the products they sell leaves a lot to be desired. Bought a brand new GoPro Hero3 for my granddaughter. Didn't know that a memory card didn't come with it. My daughter went to Best Buy, told them what I just bought and that I needed a memory card. The Best Buy sales rep. didn't know that the new GoPro Hero3 takes a different card than previous models. My daughter tried to explain, but not knowing much about it herself deferred to the 'expert' knowledge. Anyway...to make a long story short...my daughter came home with the wrong card. After another almost 40 miles one way trip, she discovered that Best Buy didn't carry that card. Two trips to Best Buy and disappointed both times. My granddaughter didn't get the memory card for her GoPro so she couldn't use it on her ski trip.
Needless to say....I'm not vey happy with Best Buy.
MORE ON MSN MONEY
DATA PROVIDERS
Copyright © 2013 Microsoft. All rights reserved.
Quotes are real-time for NASDAQ, NYSE and AMEX. See delay times for other exchanges.
Fundamental company data and historical chart data provided by Thomson Reuters (click for restrictions). Real-time quotes provided by BATS Exchange. Real-time index quotes and delayed quotes supplied by Interactive Data Real-Time Services. Fund summary, fund performance and dividend data provided by Morningstar Inc. Analyst recommendations provided by Zacks Investment Research. StockScouter data provided by Verus Analytics. IPO data provided by Hoover's Inc. Index membership data provided by SIX Financial Information.
Japanese stock price data provided by Nomura Research Institute Ltd.; quotes delayed 20 minutes. Canadian fund data provided by CANNEX Financial Exchanges Ltd.
LATEST POSTS
Here's a list of ways to profit from the potential move from defensive to cyclical stocks.
FIDELITY VIEWPOINTS
- How to sell covered calls - Fidelity Investments
- Savvy year-end tax moves to consider now - Fidelity Investments
- Seven ways to prepare for tax changes
- Five reasons an annual review is crucial - Fidelity Investments
- Take a look at mid caps now - Fidelity Investments
- State of the sector: Health care - Fidelity Investments
VIDEO ON MSN MONEY
ABOUT
Top Stocks provides analysis about the most noteworthy stocks in the market each day, combining some of the best content from around the MSN Money site and the rest of the Web.
Contributors include professional investors and journalists affiliated with MSN Money.
Follow us on Twitter @topstocksmsn.

