Is Best Buy a smart buy now stock?
Best buy (NYSE: BBY) has one of the most impressive stories of any traditional retailer when it comes to adapting your business to thrive in an e-commerce world. However, in this fool live Video clip, recorded on December 13, Fool.com contributor Matt Frankel discusses whether or not he would buy the stock now or not.
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Matt Frankel: It was Best Buy. About 10 years ago, Best Buy made one of the most successful business hubs of any retailer I’ve seen. They have nailed the pivot to omnichannel. They nailed it completely. I don’t think anyone would disagree on that. Remember going to Best Buy over 10 years ago and how much floor space was taken up by DVDs? Space wasted everywhere in their stores.
They’ve really done a great job reducing their square footage, making better use of their store, getting people in the door, getting people to buy their products there with comparable price guarantees. Because if you remember, for a long time the big deal was people would go to Best Buy to see things and then buy them on Amazon (NASDAQ: AMZN) or somewhere online where it was cheaper. They solved this problem really well. There are a lot of opportunities for the future.
There is, for example, same day delivery. I live in Columbia, South Carolina. We can’t get anything here today. I had a router delivered same day from my local Best Buy. Their same day delivery volume is up 400% year over year. They are offering twice as many products on the same day as a year ago. It is a great opportunity for expansion in the future that they seem to be seizing.
They suffer from supply chain issues. Their growth recently because of this and because they were the primary beneficiaries of the pandemic, I feel like a lot of people have preloaded their electronic spending. People needed laptops to work. They bought one last year when they had to work from home. They needed to upgrade their wireless infrastructure. When let’s just say your business starts up a live streaming platform like this like I did, it’s going to have it last year. Best Buy sales have been essentially flat year over year in the last quarter. They also suffer from supply chain disruptions. They’re having trouble getting inventory.
I don’t see this vacation quarter being that great, and they’ve already warned that margins are going to go down next year. As the supply chain issues resolve themselves and the economy normalizes, the pricing power they have, will also deteriorate a bit. They warned that they were going to have more discounts and things like that next year. Out of all of these, I consider the risk / reward here not to be as great. I think their pivot to omnichannel was fantastic. Many other retailers can learn many lessons from Best Buy.
John Mackey, CEO of Whole Foods Market, an Amazon subsidiary, is a member of the board of directors of The Motley Fool. Matthew Frankel, CFP® does not have a position in any of the stocks mentioned. The Motley Fool owns and recommends Amazon and Best Buy. The Motley Fool recommends the following options: January 2022 long calls at $ 1,920 on Amazon and January 2022 short calls at $ 1,940 on Amazon. The Motley Fool has a disclosure policy.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.