Best Buy shares top $40 for the first time since 2010

  • Article by: DAVID PHELPS , Star Tribune
  • Updated: October 15, 2013 - 8:37 PM

An analyst said the company is seeing “improved market share in key categories.”

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The 7.6% jump in Best Buy shares on Thursday put the company on top of the list of best performing stocks in the S&P 500 for the year.

Photo: Marlin Levison, Star Tribune

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Best Buy Co. Inc. shares moved to a new level Tuesday, nudging above $40 for the first time in nearly three years.

With a closing quote of $40.62, stock in the Richfield-based retailer has basically doubled since Hubert Joly took over as CEO of the beleaguered company in September 2012. Shares traded as low as $11.29 in late December.

Tuesday’s upward move was fueled in part by increasing confidence on Wall Street that the company’s turnaround is gaining traction. Best Buy’s 2.6 percent gain came as broader markets dropped nearly 1 percent amid growing fears of a possible government default.

One analyst reported Tuesday that comparable-store sales, earnings per share and market share have all improved during the third quarter.

Cleveland Research analyst Daryl Boehringer said in a research note that same-store sales are up 2.5 percent from 1 percent midway through the quarter while earnings per share estimates rose from 12 cents to 17.

Best Buy is “seeing improved market share in key categories” and “benefits from store redesigns,” which gives a larger footprint to higher-margin products, Boehringer wrote.

Edward Jones & Co. analyst Brian Yarbrough said in an interview that Best Buy’s cost-cutting efforts are starting to bear fruit.

“They haven’t shown sales growth yet but cost-cutting has delivered,” Yarbrough said. “We’ve also seen evidence of improved customer service and a reallocation of space within the stores to emphasize tablets and appliances and mobile phones and give less space to [lower-end] items like gaming and DVDs.”

The stock’s recovery dates from last December and January, when the company was locked in a boardroom fight with former chairman and CEO Richard Schulze, who subsequently abandoned efforts to regain control of the retailer he founded in the mid 1960s.

Dave Brennan, marketing professor and co-director of the Institute for Retailing Excellence at the University of St. Thomas, said Best Buy has staunched its internal bleeding in recent months and is in a better position to compete with Internet retailers such as Amazon and bricks-and-mortar competitors like Wal-Mart.

Brennan said the upcoming holiday season will be critical for Best Buy.

“Every holiday season is pretty important but this one will tell us if Best Buy is back or not,” he said.

Best Buy annual sales have plateaued at about $50 billion since 2010.

 

David Phelps • 612-673-7269

 

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