On Jan 16, we upgraded consumer electronics retailer,
Best Buy Company Inc
) to Neutral from Underperform based on its holiday sales
performance that showed signs of improvement. Moreover, Best Buy
became a Zacks Rank #3 (Hold) stock shortly after reporting its
holiday sales numbers.
Why the Upgrade?
Best Buy's holiday sales were not as bad as expected with
total revenue coming in at $12.8 billion, marginally down from
$12.9 billion in the comparable prior-year period.
The highlight of the period was the company's domestic
comparable-store sales (comps) results, which seem to be
stabilizing with comps remaining flat during the key holiday
season. The company's strategic initiatives, including its price
match policy, multi channel strategy, lucrative assortments and
employee training facilitated the company to come up with
Further, sturdy online sales performance remains a positive
for the company. During the 9 weeks period ended Jan 5, 2013,
Domestic segment's online channel revenue jumped 10% to $1.1
billion, reflecting strong traffic.
However, secular headwinds and falling comps in key categories
including televisions, gaming, notebooks and digital imaging
remain looming concerns. Additionally, Best Buy remains cash
strapped with cash plunging 85.1% year over year to $309 million
at the end of the last reported quarter.
Moreover, intensifying competition from online retailers like
), is adversely affecting its sales and profitability as online
retailers are gradually encompassing new merchandise categories
under their purview and offering lucrative discounts on products
with free shipping services to attract customers.
Other Stocks to Consider
Until any further upward revision in Best Buy's rating, other
consumer electronics retailers worth considering include
), which hold a Zacks Rank #1 (Strong Buy) and a Zacks Rank #2
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