Best Buy’s New Strategy a Buying Opportunity?

stock analysisThe sector that will be the topic of focus for the stock market over the next month is, of course, the retailers as we march on from Black Friday and Cyber Monday toward the key holiday shopping season.

To tell the truth, I’m not much of a shopper. I hate going to the malls and fighting the congestion of other shoppers scrambling for deals, especially on the crazy shopping days, like Black Friday.

I did, however, happen to venture out to Best Buy Co., Inc. (NYSE/BBY) recently and noticed the store looked fresh, the workers were energetic and eager to help, and there were excellent discounts.

Now I must admit that based on my stock analysis, I really believed Best Buy would have been privatized by now, especially following the previous attempt to do so by former CEO and founder Richard Schulze. Now, the company is under the leadership of Hubert Joly, who has had decades of success working at Electronic Data Systems Corporation, Vivendi Universal, and Carlson Wagonlit Travel. Joly, who took hold of the reins in August 2012, appears to be getting Best Buy back on track, as my stock analysis suggests.

This former darling of Wall Street and the “Best of Breed” in electronic retailing has been hurt by the rise of fierce competition from both physical and online rivals, including Wal-Mart Stores, Inc. (NYSE/WMT) and Amazon.com, Inc. (NASDAQ/AMZN), according to my stock analysis. The threat of extreme competition and the intense pressure on margins has forced Best Buy to rethink its strategy, based on my stock analysis.

Armed with an aggressive pricing strategy and offensive attack, Best Buy may be able to avoid what happened to its previous top rival Circuit City Stores, Inc., which ceased operations in 2009 following six decades of business.

My stock analysis suggests that, given the rise in online sales, companies that sell generic goods as Best Buy does via physical stores will have to continue to fend off rivals and avoid becoming the next Circuit City or Blockbuster.

According to my stock analysis, whether Best Buy succeeds will largely depend on its pricing policy. The fact is that shoppers of electronic goods don’t care where they buy the item; they only care to search for the best prices. This is the reason why online sales by companies such as Amazon.com have become such a threat to physical stores, as indicated by my stock analysis. The process of buying electronics online is easy. Unlike clothing, you don’t have to try something on. If you are looking for a new “iPad,” you will simply be looking for the best price.

Best Buy still has its advantages, as there are still the majority of shoppers who would rather go to a store and compare various brands prior to making a decision. Buying at a store also allows the shopper to bring the product home immediately versus ordering online. If the store can offer the best price, the shopper will buy; otherwise, they may simply buy the product online or at a competitor to save an extra buck.

My stock analysis indicates that Best Buy appears to understand this and has pursued an aggressive pricing strategy that includes price-match guarantees and a monitoring of prices at Amazon.com.

Given the new strategy and focus, I would not be counting Best Buy out as of yet; in fact, I would actually consider the company as a possible decent buying opportunity, based on my stock analysis.

(To learn about a similar shift in strategy from Apple Inc. [NASDAQ/AAPL], see “If Apple Does a Deal with This Company, I’d Buy the Stock.”)