Best Buy Co., Inc.
) surged to attain a new 52-week high of $43.50 on Oct 22, 2013,
before closing at $43.08. Shares of this Zacks Rank #2 (Buy)
stock have amassed a year-to-date return of roughly 271.7%.
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Based on the current price, this online and brick and mortar
electronic retailer is 7.0% above the Zacks Consensus average
analyst price target of $40.27. The company currently trades at a
forward P/E of 17.8x, almost in line with the peer group average.
Best Buy is undergoing a turnaround program including the price
match policy, multi-channel strategy, multi-year cost reduction
program and closing of some big box stores. Its 'Revenue Blue'
project is expected to minimize costs. Best Buy, in
second-quarter fiscal 2014, has successfully lowered its cost by
$65 million, thereby bringing the total reduction to $390 million
out of $725 million targeted from the North American business.
Management is undertaking a competitive pricing strategy and
making investments in areas such as online, mobile, the
multi-channel approach, optimum utilization of floor area and
refurbishment of its website (bestbuy.com) functionality. Best
Buy also initiated the "buy online - ship from store" endeavor.
Best Buy's online sales performance remains a positive. Domestic
online sales came in at $477 million, while comparable online
sales jumped 10.5%. We believe that the company is leaving no
stone unturned in wooing consumers and capturing incremental
revenue, as evident from its strategic initiative of forming a
partnership with Samsung and opening "Samsung Experience Shops"
within its stores.
It also entered into a similar agreement with
) to roll out "Windows Store" across its 500 outlets in the U.S.
with an additional 100 in Canada. For Best Buy, the deal adds
more compelling products to its portfolio to better compete
against discount giants such as
Wal-Mart Stores Inc.
) and online retailers like
Best Buy also completed the divestiture of its 50% stake in Best
Buy Europe to Carphone Warehouse Group, the joint venture partner
in the same. The move would facilitate the company to concentrate
more on its U.S. operations. We believe that the step to offload
its stake in Best Buy Europe would augment its return on capital