Best Buy: A Heck Of A Miss

| About: Best Buy (BBY)

Bloomberg tries to put some polish on yet another turd with...

Best Buy Co. (NYSE:BBY), the consumer-electronics retailer shunning a takeover attempt by its founder, reported second-quarter profit that trailed analysts' estimates and suspended its earnings forecast as sales of computers and televisions dropped.

Net income fell 91 percent to $12 million, or 4 cents a share, from $128 million, or 34 cents, a year earlier, the Richfield, Minnesota-based company said today in a statement. Excluding some items, profit was 20 cents a share. The average of 21 analysts' estimates compiled by Bloomberg was 31 cents.

That's a hell of a miss.

The real problem is that same-store sales are collapsing. 3.2% in decline q/o/q is bad news, especially considering that neither quarter is one where serious seasonal changes are afoot.

The fundamental problem with Best Buy is that there's simply no reason to shop there. There's no product you have to own; TVs are a deteriorating-margin business exactly as they were before the LCD took over, video game systems are a stagnant (some would say collapsing market) as things move to the Internet, computers are a deteriorating margin product, tablets are a deteriorating margin product..... what's left?


Who (other than people like me, who still appreciate a good camera) wants one? Everyone's cell phone is a camera too, right?

Never mind that cellphone margins are collapsing too.


No innovation of note -- anywhere. Add to that a squeezed consumer and you have collapsing margins, no "must-have" high-margin products and thus no drivers of profit.

These guys are a zero, and while management is part of it, it's not the whole story.

The rest is that there's simply no reason to shop for what they sell. It's all replicated Chinese crap without soul, without a compelling reason to own, and as such there's no demand.

Now add to this a price:book of 1.7 (before the collapse in price this morning) and you have a stock that even at this price is over-valued.

If they can't turn EPS around, and I see nothing that does that for them in the near term, they'll bleed money slowly for a while, then a whole lot faster and by the end of 2014 the firm will be gone.

Disclosure: Long gravestones and burial plots, but no position in the company itself.