Why Best Buy Is NOT Going Out of Business

Why Best Buy Is NOT Going Out of Business
This is a Guest Post by AK of Fallible
AK has been an analyst at long/short equity investment firms, global macro funds, and corporate economics departments. He co-founded Macro Ops and is the host of Fallible.

How is Best Buy (BBY) still surviving? Shouldn’t Amazon (AMZN) have destroyed them by now? Well it turns out not only is Best Buy surviving, but it’s thriving.

Back in 2012 Best Buy was indeed struggling. Their profits shrunk 90% in one quarter and their CEO was caught in some deep water scandal with one of their employees. During that time, a new CEO was put into place — Hubert Joly.

When he came in Joly launched the Renew Blue initiative. He had the company shut down stores, exit unprofitable regions, and cut a bunch of their internal costs. Since the beginning of that initiative, debt is down 53%. Plus, cash on hand has grown from $1.2 billion in 2012 to $3.1 billion in 2018.

In that time, online revenue has also more than doubled, from 7% of all US sales to 16%. This is a much larger percentage of online sales compared to other big box retailers. The company has also increased their dividend in each of the last 5 years. It’s compounded annually by 19% and today sits yields 2.4%. So even dividend investors are excited about this play.

There are two main reasons Best Buy has been able to pull off this turnaround — their customer service and their real estate.

Customer service at Best Buy has improved tremendously over the last few years. Joly has been investing in the sales staff since he’s been in play. He said they were “considered not very competent and not very engaged.”

Best Buy also has way more stores than any of these tech companies like Amazon. So these companies need BBY to show off their products.

To learn more, make sure you watch the video above!

And as always, stay Fallible out there investors!

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***All content, opinions, and commentary by Fallible is intended for general information and educational purposes only, NOT INVESTMENT ADVICE.