Best Buy Stock Surges in 2013. Plunges in 2014
This multinational retailer of consumer electronics, computing and mobile phone products, entertainment products, appliances and related services has a market cap of over $14.00B. BBY makes our list of 2013 best performing stocks due to the +234% surge in its stock price in 2013.
Part of the reason that BBY was on fire in 2013 can be attributed to CEO Hubert Joly's 6-point "Renew Blue Revitalization Plan”.
The revival strategy, which includes stepping up growth of online sales; improving the multichannel customer experience; optimizing store square footage; enhancing supply chain efficiencies; optimizing the U.S. real estate portfolio; and cutting unnecessary selling, general and administrative expenses, seems to have worked so far in 2013.
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However, in 2014, the stock has been faced with selling pressure due to continual declines in sales. The dismay sales results prompted the company to eliminate 950 jobs.
As reported by the LA Times: “Best Buy Co. watched its stock plunge more than 27% in morning trading Thursday after announcing poor holiday results that suffered from heavy competition and deep discounting”.
Others argue that Best Buy is living on borrowed time. As reported on USA Today, “It's no secret that Best Buy’s business model is not sustainable. Stores that rely on bricks-and-mortar stores for the lion's share of business simply can't do so against competitors with dramatically lower fixed costs — namely, Amazon.com”.
Investors should continue watching BBY's performance. The company may well see additional upside during 2014 as “Renew Blue” starts to deliver additional momentum to revenue and earnings.
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However on a longer-term, as more and more OEMs take their products directly to the customer, BBY's margins could continue to take a hit.
OEMs: Original Equipment Manufacturer – refers to companies that make products for others to repackage and sell.