Best Buy Company Inc. (BBY), the leading specialty retailer of consumer electronic products, recently announced a string of strategic measures to boost its financial performance across its international and local divisions.
The company intends to increase its investment in sections of business generating profits, and will close down and restructure certain sections that no longer contribute significantly to its growth.
Followed by an extensive evaluation, Best Buy, which faces stiff competition from Wal-Mart Stores Inc. (WMT), aims to open 150 Best Buy Mobile stand-alone-stores in the U.S. and 40 to 50 Five Star stores in China by the end of fiscal 2012, bringing the total to 325 stores in the U.S.and 210 in China.
Moreover, the company plans to open 6 to 8 large-format stores in the U.S.and a total of 18 stores in the United Kingdom, Mexico and Canada in fiscal 2012.
The International market continues to bring noteworthy prospects for the company along with financial growth for the stakeholders.
Best Buy Mobile brought brisk escalation in wireless connection revenues for the company in the U.S.market and the Five Star stores continue to produce noteworthy sum of profits for the company.
Additionally, the retailer will put up the shutters on two large-format stores in Turkey and end all existing operations in the country. Moreover, China will also witness the closure of nine Best Buy-branded stores as the consequence of the restructuring actions.
As discussed earlier, the company aims to look at other profitable choices for the Best Buy brand and will revive two of the China stores later. The company expects to strengthen the functions of the Best Buy brand in China with the Five Star division.
With this move, the retailer expects to produce considerable savings of $60 to $70 million by fiscal 2013, reflecting abridged losses and reduced IT infrastructure costs allied to the proceedings taken in the Chinaand Turkey markets.
The company also intends to bring certain changes in its supply chain operations in the U.S., for enhancing efficiency and customer service and reducing overheads. The company foresees a restructuring charge of $225 million to $245 million with the major portion to be incurred in fiscal 2011 and the balance in 2012.
The company maintains its fiscal 2011 diluted earnings forecast of $3.20 to $3.40 per share, excluding restructuring charges.
Currently, we maintain a long-term ‘Neutral’ recommendationon the stock. Moreover, Best Buy’s shares maintain a Zacks #3 Rank, which translates into a short-term ‘Hold’ rating.
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