Rumors of Best Buy's Demise Are Greatly Exaggerated

Best Buy (NYSE: BBY) recently slashed their revenue and profit forecast based on huge swings in consumer purchasing behavior. Don’t expect this to be much more than a small blip for Best Buy/ Although there may be less people shopping at Best Buy, given the economy. those that do visit are spending more than ever.

The average person shopping at Best Buy spent $193.18 a month in October, 2008 up 12.5% from the $172.63 spent in January 2008. This data according to the new Main Street Spending Index (MSSI) compiled by Geezeo, a personal finance Web site that helps consumers track their spending.

While Best Buy continues to execute, their chief competitor, Circuit City (CCTYQ.PK), recently announced its filing for bankruptcy. Expect Best Buy to announce a bounce back soon.

Disclosure: no positions

Comments

[Rudeman:]

Terrible analysis.

January and October are not the same month so they should not be compared. Hell, why not pick July and October?

Less people shopping typically equates to higher average orders. If only one person shopped all month and he bought a $1000 plasma they would have a great average order for that month. Less people shopping equals less gross sales. That is never good.

Here's my quick take. Analyst will expect Best Buy to gain the marketshare that Circuit City is giving up by closing stores. Sadly many of Circuit City shoppers were/are Wal Mart shoppers. Not being able to grow sales (enough) from the demise of Circuit City will cause analysis to hammer Best Buy stock down.

For reference review what happened to the Toys store industry as Toys R Us killed their competition - Lionel Playworld and Child World.

I do think Best Buy management is smart and in the end they will bounce back -- when the economy does.

2008 Nov 25 08:20 AM

[billddrummer:]

BBY has successfully emerged as a store that offers knowledgeable sales staff, a low-pressure atmosphere, and a customer focused way of operating.

The company has continued to open new stores, not because of 'overexpansion' as charged by some analysts, but because the best way to profit from a recovery is to have attractive locations ready to receive new customers. Whether recovery is next year or in 2010, the company will benefit from higher incremental sales as the year progresses.

2008 Nov 25 11:13 AM

[Bubba Jones:]

Guys...the party is over. The consumer is out of money and credit. It doesn't matter how great BBY's stores are, how fantastic their salespeople are, how super the management is. Consumers are afraid of this economy, they are afraid for their jobs and most of them are up to their necks in debt.

GET A GRIP !

2008 Nov 25 04:47 PM