Best Buy Co., Inc. (BBY): The Plan That Could Keep This Retailer’s Stock Rising

The Amazon threat

One of Best Buy’s biggest competitors is the online retailer Amazon.com, Inc. (NASDAQ:AMZN). Amazon.com, Inc. (NASDAQ:AMZN) offers the same products as Best Buy and consumers have been using the brick and mortar stores as show rooms for cheaper online shopping.  These customers take advantage of store amenities such as the work force and physical products but refuse to pay  the higher prices.

Best Buy is dealing with this problem through their “low price guarantee” that would eliminate Amazon.com, Inc. (NASDAQ:AMZN)’s price advantage.  These lower prices will hurt Best Buy’s margins, but are necessary in order to improve store sales.

Best Buy also has the Geek Squad, which offers tech support to customers.  This convenient tech support helps separate Best Buy from Amazon’s support, which is limited to the phone or internet, and is not as hands-on as Geek Squad.  With in-store “Precincts,” the Geek Squad acts as an additional draw for customers.

Best Buy Co., Inc. (NYSE:BBY) isn’t a perfect parallel competitor of Amazon, which is a much larger company that offers different products.  Best Buy won’t “beat” Amazon, but with Best Buy’s improving online capabilities and price management, the company has developed a solid strategy to deal with Amazon and other online competitors.

Conclusion

Under the leadership of Hubert Joly, Best Buy Co., Inc. (NYSE:BBY) has taken steps to increase efficiency, improve its online sales, and create a competitive advantage. The Renew Blue initiative looks like a good plan and if effectively implemented could lead to increased earnings for Best Buy and continued share growth in the future. But with the massive run Best Buy’s stock has had this year and the decline in revenue last quarter, I’d wait for a pullback, then call it a buy.

The article The Plan That Could Keep This Retailer’s Stock Rising originally appeared on Fool.com and is written by Ben Popkin.

Ben Popkin has no position in any stocks mentioned. The Motley Fool recommends Amazon.com. The Motley Fool owns shares of Amazon.com and Microsoft. Ben is a member of The Motley Fool Blog Network — entries represent the personal opinion of the blogger and are not formally edited.

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