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Best Buy Co Inc BBY

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Economic Moat




Best Buy's Sales Momentum Suggests Heightened Near-Term Consumer Demand, but Fully Priced Into Stock

R.J. Hottovy, CFA Sector Strategist

Analyst Note

| R.J. Hottovy, CFA |

The key takeaway for investors coming out of no-moat Best Buy's second-quarter sales update is that consumer demand for work-from-home, appliance, and personal computing products have not been dampened by macro pressures or a wind-down in consumer stimulus spending. Through July 18, the company reported that sales for the quarter had grown 2.5% (2% domestically and 8% internationally), which represents material acceleration from the 8% declines reported during the latter part of the first quarter (April 12-May 2). We had anticipated mid- to high-single-digit sales declines during the quarter, but it appears that consumers have responded to Best Buy's improved online experience (online sales up 255% year over year) and that demand for work-from-home (computing, tablet) and home confinement (appliance) categories has held up (particularly in international markets). While we don't expect Best Buy's recent momentum (sales growth of 15% from June 15-July 18) to continue due to elevated unemployment and uncertainty regarding consumer stimulus efforts, we believe mid-single-digit growth is achievable for the balance of the year.

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Company Profile

Business Description

Best Buy is one of the largest consumer electronics retailers in the U.S., with product and service sales representing 9.3% of the $450 billion-plus in personal consumer electronics and appliances expenditures in 2019 based on estimates from the U.S. Bureau of Economic Analysis. The company is focused on accelerating online sales growth, improving its multichannel customer experience, launching new in-store and in-home service offerings, optimizing its U.S., Canada, and Mexico retail store square footage, lowering cost of goods sold through supply-chain efficiencies, and reducing selling, general, and administrative costs.

7601 Penn Avenue South
Richfield, MN, 55423
T +1 612 291-1000
Sector Consumer Cyclical
Industry Specialty Retail
Most Recent Earnings Apr 30, 2020
Fiscal Year End Feb 1, 2021
Stock Type High Yield
Employees 125,000