The Evolution of Best Buy

Jun. 4.10 | About: Best Buy (BBY)

Best Buy (NYSE:BBY) is the largest specialty retailer of consumer electronics in the US and is increasingly competing with Wal-Mart (NYSE:WMT). The company sells a variety of brands of electronic devices such as TVs, home theater systems, cameras, computers, mobile phones as well as repair and installation services to consumers across the country under different store brands.

Best Buy has expanded its customer reach within the US market through acquisitions that provide it greater access to new types of customers. The company has also expanded into international markets (Canada, China, Europe) over the years and Best Buy’s international business is expected to be increasingly important going forward.

Acquisitions Help Best Buy Extend Its Customer Reach

In 2001, Best Buy acquired Magnolia Hi-Fi, a high-end retailer of audio and video products and services, which gave it access to more upscale customers. In 2007, the company acquired Pacific Sales which specializes in high-end kitchen appliances, home entertainment and furnishing products. This was yet another move by Best Buy to expand its reach amongst affluent customers and grow its premium brands.

Apart from penetrating into the upscale customer segment, Best Buy’s acquisition of Geek Squad in 2003 was primarily driven by the retailer’s intention to expand its installation and support services. This allowed Best Buy to generate additional revenue from these services as well as improve customer satisfaction.

Best Buy Expands Internationally Through Acquisitions

Best Buy has expanded into international markets like Canada, China and Europe through acquisitions. The company acquired retail chains like Future Shop in Canada, Five Star in China and Carphone Warehouse in Europe to establish a strong base. Apart from retaining these chains under their original brands, the company has also opened its stores under the Best Buy brand in these geographies.

You can modify our forecast above to see how Best Buy’s stock depends on the number of international stores.