Best Buy Co., Inc. (BBY) Is Not a Buy Without a Buyout, But This Stock Is

Best Buy Co., Inc. (NYSE:BBY) has seen an interesting rebound in its stock price over the past few months, this despite the retailer’s founder, Richard Schulze, announcing that any possibility of a buyout was off the table. Schulze’s speculated off to takeBest Buy private, back in August, was said to be upwards of $24 per share. Schulze, owning 20% of the brick-n-mortar company, was hoping to pull off a management led buyout to take the company private and revamp its deteriorating business model. Despite Schulze’s decision not to pursue a buyout, the stock still moved higher. However, I remain cautious on the brick-and-mortar retailer, and would rather look to Aaron’s, Inc. (NYSE:AAN) to gain some exposure to the  electronics retail market.

How are Best Buy’s competitors faring?

GameStop Corp. (NYSE:GME), another major consumer electronics retailer, has also seen weakness lately. Its recent holiday sales, for the nine weeks ending Dec. 29, 2012, dropped 4.6% from the same period last year. This big drop was driven by the a 15.6% fall in the pre-owned sales category on a year over year basis. GameStop has a lot of exposure to the video game industry, a relatively niche industry. Expected new gaming equipment releases should help boost revenues in the interim (read more here). However, the alternatives popping up in the video game marketplace, namely online gaming, should only continue to pressure the stock in the long-term.

RadioShack  Corporation (NYSE:RSH) has been struggling the most, and is down 50% over the last twelve months. The company is expected to post an EPS loss of $0.44 for 2013, which is in large part due to its transition to a lower-margin mobile business. RadioShack is seeing competition from Best Buy Co., Inc. (NYSE:BBY) as it too looks to mobile with its rollout of smaller mobile stores, which will indeed infringe upon RaidoShack’s initiative to become mobile phone focused. One of the overwhelming reasons for RadioShack’s big fall is that its “core” business is consumer electronics, where this specific segment has seem some of the most pressure from ecommerce company Amazon and should continue to see pressure going forward.

Aaron’s announced projected EPS earlier this month for the first quarter 2013 that should come in at $0.74 to $0.75, versus analysts’ estimates of at $0.71. For 2013, management targets new store growth of about 5% year over year, while also looking to execute its recent strategy of acquiring franchised stores and selling underperforming company-operated stores. The company is also very good at attracting returning customers. Comps at company-owned stores was up 4.6% last quarter year over year, on the back of 7.8% growth in customer traffic; meanwhile, comps at the company-franchised stores was up 6.5% on the back of a 9.6% increase in customer traffic.