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Retail

No Recovery At Best Buy

Photo of Douglas A. McIntyre
By Douglas A. McIntyre Updated Published
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The market does not expect much from Best Buy (NYSE: BBY). The company is about to release quarterly figures. Analysts think that results will be hurt by low TV sales. Best Buy management counters that it can get buyers who have deserted it for Wal-Mart (NYSE: WMT) and Costco (NASDAQ: COST) back. Best Buy’s big problem is that it customers have gone online, not just to Amazon.com (NASDAQ: AMZN) but to the heavily trafficked websites of Wal-Mart and Target (NYSE: TGT).

Best Buy can reconfigure stores and lower prices. Those things do not help when the way that people purchase consumer electronics goes through a paradigm shift. Best Buy does not have the problem that Blockbuster or Circuit City had, but it is headed in that direction.

Best Buy may find that its only alternative to keep earnings at reasonable levels is very sharp costs cuts. Blockbuster did that too late and the consequences were disastrous. Best Buy has already forecast weak sales this year, and there is no reason to believe that will change.

The company’s revenue is about $12 billion a quarter with the normal increase in the holiday season. Its net income is barely $200 million. That margin is already too thin. An even modest drop in sales will probably drive Best Buy to a loss.

Some businesses which were a remarkable successes for a time find that their models no longer work. They have almost no prospect of re-invention when the way customers get their products has changed radically and rapidly. Best Buy is in that situation now, and management is nearly out of options.

Douglas A. McIntyre

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About the Author Douglas A. McIntyre →

Douglas A. McIntyre is the co-founder, chief executive officer and editor in chief of 24/7 Wall St. and 24/7 Tempo. He has held these jobs since 2006.

McIntyre has written thousands of articles for 24/7 Wall St. He is an expert on corporate finance, the automotive industry, media companies and international finance. He has edited articles on national demographics, sports, personal income and travel.

His work has been quoted or mentioned in The New York Times, The Wall Street Journal, Los Angeles Times, The Washington Post, NBC News, Time, The New Yorker, HuffPost USA Today, Business Insider, Yahoo, AOL, MarketWatch, The Atlantic, Bloomberg, New York Post, Chicago Tribune, Forbes, The Guardian and many other major publications. McIntyre has been a guest on CNBC, the BBC and television and radio stations across the country.

A magna cum laude graduate of Harvard College, McIntyre also was president of The Harvard Advocate. Founded in 1866, the Advocate is the oldest college publication in the United States.

TheStreet.com, Comps.com and Edgar Online are some of the public companies for which McIntyre served on the board of directors. He was a Vicinity Corporation board member when the company was sold to Microsoft in 2002. He served on the audit committees of some of these companies.

McIntyre has been the CEO of FutureSource, a provider of trading terminals and news to commodities and futures traders. He was president of Switchboard, the online phone directory company. He served as chairman and CEO of On2 Technologies, the video compression company that provided video compression software for Adobe’s Flash. Google bought On2 in 2009.

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