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Looking at today's market, it's hard to believe Best Buy Co. Inc. (NYSE: BBY) stock soared 254% in 2013, landing it among the 10 best-performing stocks of 2013.
Today (Thursday), shares of the Richfield, Minn.-headquartered company plummeted some 33% following reports of disappointing holiday sales. It was the largest single-day percentage drop for the stock since Aug. 8, 2002.
BBY ended the day down 28.59%, or $10.74, to close at $26.83.
For the nine weeks ended Jan. 4 - aka the crucial holiday season, which can amount to up to 40% of annual sales - Best Buy's sales slipped 0.8% at stores, websites, and call centers open for at least 14 full months. Analysts had expected growth.
Best Buy's steep seasonal price cuts, aimed at getting shoppers into its roughly 1,105 big box stores, 100 mini mobile standalone stores, and clicking "buy" on its online site, actually worked to the company's disadvantage.
President and Chief Executive Officer Hubert Joly said in a statement that the deeply discounted holiday season, coupled with Best Buy's aggressive competitive pricing efforts, came at a higher-than-expected cost to the company's bottom line. The company now expects operating income to decline in Q4.
Total revenue slumped 2.6% to $11.5 billion over the holiday shopping season, with domestic sales slipping 1.5%.
"Their initiatives are not driving traffic," Michael Pachter, a Wedbush Securities analyst who has an "Underperform" on shares, told Bloomberg. "They are positioning as if competition will go away, and it won't. The Internet never sleeps."
The Internet proved to be Best Buy's one bright spot. U.S. comparable online sales climbed 24% over the holiday period.
Yet while its website receives more than a billion visitors per year, just 1.3% of those visitors actually purchase a product. Most use the site simply to peruse and conduct price checking. And competing with the likes of Amazon isn't easy.
Investing in Best Buy (BBY) Stock Now
Some traders see a short-term opportunity in BBY shares amid Thursday's painful plunge. The feeling is the steep one-day nosedive is an overreaction, leaving shares cheap.
MORE RETAILERS THAN CUSTOMERS
All the large retailers are in some degree of "trouble", as the rate of population growth and long term economic growth ( annual GDP) has slowed considerably since 2000. Our "recovery" or so-called "new normal" simply can not support the many specialty retailers and big box traditional retailers in millions of malls scattered about the U.S.A. Too many retailers, too many malls, too much floor space and too much inventory.
Migration to the internet for e-commerce has hurt too, but may not be the deciding factor. Higher costs for the essentials, such as transportation, housing, food, gas, utilities, etc. have squeezed consumers whose wages are essentially flat. Taxes are going up too. Less disposable income means the mass market retailers are overbuilt.
Unfortunately,BBY was also in the same 4 stock list,and that was the one I followed,apart from AAPL…and it came with a "strong buy" reccomendation…
:(
There is an issue seemingly not recognized, or included in, Best Buy's financials. In 2009, this company decided to make a conscious effort to pander to Muslim customers. They distributed a flyer wishing customers a happy Eid al-Adha while forbidding store personnel from using the phrase, "Merry Christmas." This angered many and kept shoppers away in droves. They later doubled down on this pandering and began funding the group, CAIR. A HUGE mistake.
Thus, I am not surprised BB is in trouble. Shoppers, well aware of the controversy, have, and will continue to, take their money elsewhere. Personally, I have not shopped at BB since that 2009 ad ran and will never shop there again.