Will Best Buy Have the Guts to Close Stores?

Retail

Published: April 6, 2013 9:34 am

Last Updated: April 8, 2013 6:11 am

Since the of return founder Richard Schulze and its partnership with Samsung to place many stores inside its thousand locations, there remains a single and massive problem. Best Buy Co. Inc. (NYSE: BBY) continues to have too many stores in the United States. Until that issue is addressed, Best Buy will continue to be also-ran because the cost of operating bricks and mortar locations and the fact that it still sits hopelessly behind Amazon.com Inc. (NASDAQ: AMZN) in terms of its presence on the Internet.

Wall St. has pressed up Best Buy shares to more than double their value since the beginning of the year. The price is still well below where it was two and five years ago. Investors are willing to gamble on a turnaround, but they not been sold on the notion that the retailer can ever get back to its glory days. It will take two or three quarters of impressive earnings and certainly significant same-store sales for any turnaround to show the most modest progress.

Same-store sales are of two kinds. The first is based in-store traffic patterns. The second is that some stores in its far-flung network must, like any other retail, be highlighted by those which are highly profitable and stores which are barely profitable or continue to lose money. So over the next two quarters management will have to show that it has the guts to move out of were it does not currently make and, in many cases, will not ever make money

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