by Adam Benjamin | July 11, 2013 6:15 am
People have been saying it for years: Showrooming will be the death of big-box retailers.
So how are companies like Best Buy (BBY) and even smaller H.H. Gregg (HHG) still around? Surely the ease, availability and better prices of companies like Amazon (AMZN) are well-known by now, and should have put those brick-and-mortar retailers out of business.
But they haven’t. Not by a long shot. In fact, 2013 has been a renaissance year for Best Buy. After starting 2013 at a 10-year low has rebounded 155% so far, and was the second-best-performing S&P 500 stock for the first half of 2013. (And to its credit, HHG has ripped off an impressive 110% so far this year.)
Sure, some of BBY’s growth has come from investors hoping for a buyout, but that doesn’t explain how the much-maligned electronics retailer has managed to fend off the showrooming curse enough to stay alive, let alone thrive.
So how is Best Buy keeping the lights on?
Investors beware: These reasons might explain why Best Buy is still around, but they don’t explain the company’s outsized performance in 2013, and they certainly don’t paint a picture of long-term growth.
Consider this: Best Buy has put out two earnings reports during its incredible 2013 run. For Q4 2012, it reported earnings of $1.55 that were down from $2.50 in the year-ago period, and in Q1 2013, earnings plunged from 76 cents to 32 cents. The company’s stock and its fundamentals are wildly out of whack — you have to wonder whether BBY isn’t a bubble waiting to pop.
And while more Best Buy Mobile sites is encouraging, those 50 regular-store closures give you an idea what’s happening to its core business.
Investors might be thrilled with Best Buy’s performance so far this year, but most of what it’s doing seems to point toward merely survival going forward — not real growth.
Adam Benjamin is an Assistant Editor of InvestorPlace. As of this writing, he did not hold a position in any of the aforementioned securities.
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