Yesterday, I listed the pitfalls that Wal-Mart Stores (WMT) has ahead of it and warned against buying the stock. But the fact remains that we’re approaching what is typically the strongest time of year for stocks, so now’s not the time to be cashing out entirely. So today I want to turn things around and highlight another blue and yellow big box retailer that you may want to consider adding before the holiday shopping season kicks off.
Yes, I’m talking about Best Buy Co. (BBY), which has been thinking outside of the big box lately. In addition to its namesake stores, this company also covers Geek Squad, Napster, The Phone House, Future Shop, and several other major electronics retailer brands.
Interestingly enough, this time last year, Best Buy was struggling to compete against Wal-Mart because consumers assumed (sometimes mistakenly) that Wal-Mart had the upper hand on lower prices. The company was also hit by the growing trend of “showrooming,” when customers try a product in a brick and mortar store, only to buy it for less online. The company ended up posting a $1.7 billion loss for Q4 2012.
But a lot has changed in the last year. With a new CEO at the helm (Hubert Joly), Best Buy is shifting from a product-centric business model to a customer-centric model. This holiday season, the company is launching a novel campaign, “Your Ultimate Holiday Showroom.” Through low price guarantees and the ability to order online and pick up in store, Best Buy is aiming to keep customers from buying products elsewhere. All the while, Best Buy plans to advertise aggressively this holiday season (in fact, the first ad aired last week).
This is building on an already solid profit base. For the past two quarters, Best Buy has beaten earnings estimates by 28% (in Q1) and 167% (in Q2). For the third quarter, analysts predict a whopping 150% annual earnings growth. This is while the industry as a whole is headed towards 23% bottom-line growth. And as you can see below, earnings growth is only one of four fundamental metrics that Best Buy ranks highly on:
The Best Buy of today will likely be vastly different from what we see five or ten years from now so I think now is the time to buy. BBY is an A-rated buy.