Best Buy (
) is a specialty electronics retailer that competes with general
retailers like Wal-Mart (
) and Costco (
) as well as other specialty retailers like GameStop (
) and Radio Shack (
Our price estimate for Best Buy stands at $38.48
, which is about 20% above market price.
We estimate the Best Buy's U.S. stores constitute around 70% of
the stock's value, well beyond the 22% contribution from its
international stores. This substantial difference highlights the
relative sensitivity of Best Buy's overall performance to U.S. and
international markets - Best Buy's U.S. performance is the prime
driver of its stock value.
So what makes U.S. stores more than 3 times as valuable as
international stores for Best Buy?
Difference in Number and Size of Stores
Best Buy had close to
1,100 big-box format stores in the U.S.
407 international stores
at the end of fiscal 2010.
Store size is another notable difference between Best Buy's U.S.
and international operations. While U.S. stores averaged around
38,600 square feet in 2010, Best Buy's international stores were
much smaller, averaging around 31,900. More area generally
implies more goods sold, barring large discrepancies in sales
Difference in Revenue per Square Foot
We estimate that average annual revenue per square foot for Best
Buy's U.S. stores stood at $885 in 2010, vs. $816 for
international stores. While this difference isn't huge, we
anticipate a widening spread going forward. We project that the
U.S. revenue per square foot figure will increase in the years
ahead, with the international store figure remaining relatively
Although Best Buy is expanding both in Europe and Canada, the
majority of its international expansion is expected to come from
China, which typically records revenue per square foot figures on
the low end of the spectrum. As the proportion of Best Buy
retail space in China increases relative to its total international
retail space, revenue per square foot totals could come under
See our full analysis and $38.48 price estimate
for Best Buy stock