In an effort to enhance its online shopping platform, beleaguered consumer electronics retailer, Best Buy Company Inc. (BBY - Analyst Report), recently named Scott Durchslag, a renowned technology veteran, as senior vice president Best Buy and president of its online and global e-Commerce site, BestBuy.com.
Retailers these days are competing hard for a greater share of the consumers’ wallet and are coming up with strategic initiatives to enhance customers’ shopping experience. Also, they are ushering in technological advancements and operating efficiencies to drive growth.
As for Best Buy, transformation of its online business is an imperative before the key holiday shopping season begins as online shopping exhibited a dramatic rise in recent past.
Moreover, heightened competition from online retailers like Amazon.com Inc. (AMZN - Analyst Report), is adversely affecting its sales and profitability as online retailers are gradually encompassing new merchandise categories under their purview and offering huge discounts on products with free shipping services to attract customers.
Further, Best Buy has long been struggling with dwindling sales in key categories including televisions, notebooks, digital imaging and gaming devices, which in turn, is taking a toll on the company’s same store sales results.
However, investors can take heart from the fact that measures are being taken to steer the company through these difficult times. The company announced a string of strategic measures to boost its long-term profitability. With its multi-channel strategy, the company intends to enhance its store formats while increasing its global footprint. Best Buy, through its cost reduction program, intends to generate $800 million in costs saving by fiscal 2015, including $250 million in fiscal 2013.
Additionally, Best Buy plans to accelerate the growth of its business in China through a combination of growth in connections and services and digital capabilities. Best Buy expects to open 50 new Five Star stores in China in fiscal 2013, while it plans to generate $4 billion in sales and increase the store count to 400 - 500 by fiscal 2016.
Currently, we have a long-term ‘Underperform’ recommendation on the stock. However, Best Buy, which faces competition from Wal-Mart Stores Inc. (WMT - Analyst Report), holds a Zacks #3 Rank that translates into a short-term ‘Hold’ rating.