Goodbye, Best Buy?

 | Oct 25, 2012 | 1:30 PM EDT  | Comments
  • Comment
  • Print Print
  • Print
Stock quotes in this article:

bby

,

jcp

For those of you still living in a consumer electronics world of cartwheels and lollipops, Best Buy (BBY) just may have burst your last bubble.

The company announced Q3 comps will decline at a rate similar to the past two quarters (-5.3% Q1 and -3.2% Q2). Just an educated guess Q3 ending Nov. 3 may be at the lower end of that range. Profitability continues to work against the company as gross margins are estimated to be down 100 bps or more due to product mix, product transitions and I am sure some other reasons will come up.

Oh, and did I mention Best Buy is going to save the day by offering free shipping on out-of-stock productS as well as price matching? You think you have seen the worst of gross margins? Think again. The Grinch is just getting warmed up.

New Best Buy CEO Hubert Joly is also making changes to the leadership organization. Let me rephrase. The senior ranks of the U.S. operation are being shown the door. This will result in a "leaner organization" and is "intended to improve agility." So, the current president of U.S. Best Buy is gone (but will help with a smooth transition because people shown the door always really want to help). EVP of U.S. Operations is also out. Not that you can argue with getting rid of management that has presided over 65% stock plunge over the past five years, but seriously, after CEO Brian Dunn departed (in a bit of a scandal) are there any adults left running the place?

Joly is not exactly a seasoned chief executive after fewer than two months on the job. I know he wore a blue shirt for a while, but it might take a little longer to solve the biggest problem in retail (show-rooming). And now the mobile "connectivity" guy will run the U.S. retail channel?

Best Buy will do its best on Nov. 1 in New York during its analyst day to convince us why it has a future. All I can say is this should be up there with the last few JC Penney (JCP) Ron Johnson analyst days, convincing us of the biggest transformation in retail.

And for those still touting the cash flow story? Yes, Circuit City was once a cash flow story too. Until, of course, it wasn't.

Columnist Conversations

There were nice reversal-type candles on the weekly charts of the major indices. The DOW and the S&P forme...
A number of stocks on my watch lists are attempting to form positive candles a key support levels. I noted th...
Lang:
While last week was a day to pull the plug and contemplate where the market was headed, I waited for some conf...
Shares of TSLA have formed multiple hammer candles at a key level of support defined by: the September head an...

BEST IDEAS

REAL MONEY'S BEST IDEAS

Columnist Tweets

BROKERAGE PARTNERS

Except as otherwise indicated, quotes are delayed. Quotes delayed at least 20 minutes for all exchanges. Market Data provided by Interactive Data. Company fundamental data provided by Morningstar. Earnings and ratings provided by Zacks. Mutual fund data provided by Valueline. ETF data provided by Lipper. Powered and implemented by Interactive Data Managed Solutions.


TheStreet Ratings updates stock ratings daily. However, if no rating change occurs, the data on this page does not update. The data does update after 90 days if no rating change occurs within that time period.

IDC calculates the Market Cap for the basic symbol to include common shares only. Year-to-date mutual fund returns are calculated on a monthly basis by Value Line and posted mid-month.