Tuesday, March 12, 2013

Manic Depressive Analysts Move BBY to Buy

According to the Star Tribune, ten analysts have raised BBY shares "Buy" within the past nine weeks.  Back in November, we took the position that '" 'Renew Blue' Is A Good Start for Best Buy."  Among other things, the group think consensus at that time was (1) Hubert Joly was not the right CEO for the job; (2) the company needed a highly experienced, retail exec, and  (3)  BBY was in a death march due to being a showroom for Amazon and other online customers.  Now, scant weeks later, all of these concerns have evaporated.  Such is the world of financial lemmings.

There was a recent story in the Minneapolis paper about opportunities in large appliances for Best Buy, which is something we pointed out last November.  No chain, including Home Depot and Lowe's does a "category killer" job in major appliances, while Sears has been living off its brand equity.  If Best Buy goes all ultra-high end, that is a risky business.  The whole story is going to boil down to "Right brands. Right Assortments. Right Price Strategy, with good installation and aftermarket service."  Nobody has all the elements right. Local competitors in every market come the closest.

There is still LOTS of  organizational and cultural deadwood to be hacked away by machete, and lots of low hanging fruit to yield near-term improvements.  The cultural change is going to take time and a broom sweeping through the organization.  It may not be the analysts preference for quarter-to-quarter and quarter-over-quarter straight lines, but the potential is definitely there, as it was from the day that Mr. Joly and his team came on board.

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