The Wall Street Journal paints a pretty bleak picture for Best Buy saying shares have tumbled 21 percent since Dec. 2010 and now trade at a mere nine times this fiscal year’s consensus earnings. Is Best Buy going to follow the same path as Tweeter, Circuit City?

Just two years after its arch rival was knocked out of the ring, Best Buy (NYSE: BBY - News) is itself on the ropes.

The company revealed a problem last December that has left investors scrambling for answers. Even with bankrupt Circuit City out of the picture, the retailer was losing market share, especially in the key television and computing categories. Best Buy shares have since tumbled 21% and now trade at a mere nine times this fiscal year’s consensus earnings.

Investors shouldn’t assume Best Buy simply needs time to recover. Rather, the threats it faces are likely only to worsen. Take Amazon.com (Nasdaq: AMZN - News), whose relentless growth has undercut the raison d’être of specialty retailers. That is true both in books—where Borders Group recently filed for bankruptcy protection—and in electronics.

Indeed, Amazon’s electronics and nonmedia revenue rose 66% to $18 billion last year, helping it lift market share in different segments. Its share of LCD TV sets, for instance, nearly tripled, to 3.7% at the end of 2010 from 1.3% in 2007, estimates research firm Traqline. Its share of portable audio devices rose to 11% from 4.6% in the same period.

A key to that success is that Amazon beats bricks-and-mortar retailers across the board on average electronics prices, a Wells Fargo study showed. Best Buy, on the other hand, traditionally hasn’t tried to compete on price alone but has preferred to highlight its tech-savvy staff and wider selection.

Throw Wal-Mart’s push into the CE market Steve as another factor. BB is getting squeezed on both ends, and it’s reacted I believe by trying to push custom install and musical instrument sales.

Tech savvy staff at Best Buy?  Now that’s humorous!

Igor,

Best Buy is giving every salesperson an iPad in hopes of a more “interactive sales experience.” It doesn’t get more tech-savvy than that.

http://www.cepro.com/article/report_best_buy_to_equip_sales_staff_with_ipads/

Outfitting salespeople with iPads still doesn’t mean they’ll know what to do with them except check their e-mail and show a pretty web page.  I was recently told by a Best Buy salesperson that the only way to hook up a TV was with HDMI.  “If you don’t have HDMI then you won’t be able to watch TV” was the exact quote.  No need to start a debate here but it’s funny how they claim to be tech savvy and they’ll spend money on iPads but what about decent staff training first?

I agree with you on all fronts. Sorry, was being sarcastic in my previous response. How much do you think Best Buy’s sales staff has to do with its poor financial performance of late?

I don’t think it’s a major factor that one can place “blame” on because people go to Best Buy for the lowest price and as you wrote they’re getting beat up by Amazon, WalMart, etc.  However, if they had better staff it would help to close customers on better service and better advice vs. the customer buying from Amazon and others…  Wait a minute, that’s what we do!  Better stop publicly giving such good advice to Best Buy. -

Igor, do you guys use iPads in the field at all?

Of course… We’re tech savvy!

If Best Buy does go the way of Circuit City, I can just see Wal-Mart or Amazon trying to figure out how to install a 50+ inch TV in someone’s home… This further justifies the home integrator but with rock-bottom margins on products like TVs that are easily shopped on the Internet.

These are indeed exciting times.  A question like this is more than reasonable.  If the board at Best Buy isn’t discussing this topiic exactly, the end is eminent.  However, if there is anyone at the table that has an eye for the future, they will be looking for some angle.  Clearly they have lost the position as The Place” to go for electronics.  And I seriously doubt they can survive as just the electronics convenience store like Radio Shack - who I also wonder how they survive.  Wait, I had to pay $12 for null modem serial adapter!  We’ll, that’s how Radio Shack is doing it.  Let’s see what Best Buy comes up with.  iPads are just not the answer.  But I’m sure Apple isn’t complaining.  Maybe DVD rentals. 

Best Buy has a plan and Morgan is close.  Great deduction my dear Watson.

Much to my own disappointment, I think they will be relevant again soon. 

NDA and all, I can’t say much more.

Mark C

BB isn’t going anywhere. Huge possibilities for their installation businesses ...

I can see Best Buy Eqypt, Best Buy Tunisia and Best Buy Yemen in the near future. The democratic wave in the Middle East is going to be a huge opportunity for many multi-national companies and I am sure BB is looking outside the U.S. borders to bolster its bottom line.

“TOO BIG TO FAIL”  That would be the operative outlook. The Vendors need BB.

Robert, could the same have been said about Circuit City? Look what happened to them.