As per Business Journal Report, Best Buy Co. Inc. (BBY) intends to employ a strategy of concentrating more on its smaller mobile stores, online sales and expansion in China with less and less reliance on big-box stores.
The company targets cost saves of $70 million to $80 million through the strategy and estimates a reduction in square footage at its U.S. big-box stores by 10% in three to five years down the line.
Best Buy expects to put up for sale 10 million connections in fiscal 2012, mainly at the mobile stores. The connections are related to mobile phone, home broadband, mobile broadband and video service units. The company expects to have 600 to 800 Best Buy Mobile stand-alone stores by 2016 and 325 of the smaller stores by February 2012.
The change in focus would shift the company’s key competitors from Wal-Mart Stores Inc. (WMT) and Amazon.com Inc. (AMZN) in niches like flat-screen televisions and computers to Gamespot and Verizon Communications Inc. (VZ) over mobile/gaming.
As for China, the company hopes to double its sales there to about $4 billion, over the next five years. The sales target is expected to be met by increasing the number of well-performing Five Star stores from 400 to 500. By the end of this fiscal year, the Five Star store count is expected to hit 210. Five Star incidentally is a chain that the company brought to China half a decade ago and is performing better than its flagship stores there.
Best Buy Company is a multinational specialty retailer of consumer electronics, home office products, entertainment software, appliances and related services. The company operates retail stores and websites under the brand name Best Buy.
Global sourcing is also an essential element of Best Buy’s business strategy, whereby the company comes in direct contact with the manufacturers. This, in turn, drives gross profit margin by lowering product cost and achieving product sourcing efficiency. The company operates a global sourcing office in Shanghai, China.
Best Buy shares maintain a Zacks #3 Rank, which translates into a short-term Hold rating. Our long-term recommendation on the stock remains Neutral.
AMAZON.COM INC (AMZN): Free Stock Analysis Report
BEST BUY (BBY): Free Stock Analysis Report
VERIZON COMM (VZ): Free Stock Analysis Report
WAL-MART STORES (WMT): Free Stock Analysis Report
Zacks Investment Research
