There are certain stores that I really like going to and buying stuff. Just because I will burn my cash at their altar does not mean that I want to own the retailer itself. Amazon would be my choice, but its valuation scares me. I might be a fool for avoiding it on those grounds, but I would rather be sorry and keep my money. Still, there have to be some physical retailers out there that are worth buying a stake in.
I wish we could keep bookstores for cultural reasons, but they are businesses after all. Even if Barnes & Noble, Inc. (NYSE:BKS) stays in business, there is no guarantee that the physical stores will remain. I don’t get around to the bookstore as much as I would like. Plus, I got a Kindle Paperwhite and am out of space for physical books. Perhaps, if the chain disappears, then lower overhead local bookstores can see a resurgence.
Barnes & Noble has no debt, but only $213M in cash. The trailing twelve months net loss is $117.41. That makes me concerned about the company going forward. The most recent earnings call said the company did not produce the sales it was expecting from some new products in the 2012 holiday season. It is a tough market.
The Nook has done well, carving out a space for itself, but if the company as a whole cannot generate profits to keep moving along and growing, it would not mean much. The inability to generate sales during the holidays, which is critical for a retailer, has me worried about the company’s future.
Barnes & Noble may be snapped up. Between the losses, weak holiday sales, and cash position, it seems that the company is able to muster a last stand, but what would it do? Make a new tablet? Nook Media is a joint venture with Microsoft, maybe that could save it. I do not think the joint venture alone won’t be enough.
The last electronics hero
Best Buy Co., Inc. (NYSE:BBY) has validated its believers when it comes to the stock. It is up 81% for the year so far. That is impressive, considering we are only in month three. You should not be fooled by the stock price, because the company’s future still has some dark clouds.
Closing stores is fine, but how are they going to change existing stores to stay relevant? Being the only retailer for the Leap Motion is a good start. The company lost money over the last 12 months with a trailing EPS of $(0.74). Its most recent quarter was profitable, so hope is not lost. Best Buy Co., Inc. (NYSE:BBY) needs to consistently add cash and value onto the balance sheet in order to maintain its dividend and keep its options open for potential expansion.
It might be a good idea for the company to offer more niche technology products. People looking for any camera will turn to Amazon, although they might go to Best Buy to see it before buying. If Best Buy Co., Inc. (NYSE:BBY) can carry specific cameras that Amazon does not commonly carry, or that it cannot command a low price on due to its specialized nature, then it could benefit from a smaller but more purchase-oriented customer base.
It would also allow the stores to have a smaller footprint, though not as small as RadioShack. Best Buy Co., Inc. (NYSE:BBY) could also consider developing its own product like Barnes & Noble did with the Nook to draw customers in, perhaps a tablet instead of a reader.
