Best Buy shares rose sharply in downbeat week for stocks

Shares in Best Buy Co. Inc. had their best week of the year, rising nearly 10 percent after a new analyst's outlook built on improving investor sentiment toward the big electronics retailer.

The stock also got a boost from a report in the Wall Street Journal that the Richfield-based company hired advisers to find a partner or buyer for its business in China, where it operates almost 200 stores.

The company's shares closed at $31.04 on Friday, up 2.3 percent, or 72 cents, for the day. It was the first close above $31 since Jan. 17, the day Best Buy shares plunged 29 percent on news that holiday sales were worse than expected.

The stock's performance contrasted with a 0.1 percent drop in the S&P 500 and 0.5 percent decline of the Dow Jones industrial average this week.

After more than tripling in value to become one of the best-performing stocks of 2013, Best Buy shares languished from the mid-January plunge until last month, when they began ticking upward following better-than-expected results in the February-to-April fiscal quarter.

Late Monday, a new analyst at Morgan Stanley brought the investment bank's research unit back into the retail sector by publishing reports on several firms, including Best Buy.

"At the core of our proprietary analysis is that BBY's total offering to the customer is now segment-leading," the analyst, Simeon Gutman, wrote using Best Buy's stock acronym. He added that Best Buy has never been more competitive than it is now with Amazon.com Inc., the online retailer with enormous pricing power in electronics and other segments. Best Buy shares rose 1.7 percent on Tuesday.

A Best Buy spokesman declined to comment on the Journal story, which said Best Buy hired Bank of America to develop options for its China business. The anonymously sourced report placed a value of about $300 million on the company's China operations, where it operates under the names Best Buy Mobile and Five Star.

Since the start of its new fiscal quarter in early May, Best Buy shares are up 19 percent, far outpacing the S&P 500, the S&P's consumer discretionary index and all of its retail rivals, including Amazon. The shares, however, remain about 23 percent below the $39.88 price where they started the year.

Best Buy continues to face broad challenges as it grapples with declining sales and price compression of products like TVs and computers. Competition from Amazon and consumer electronic vendors have only intensified the pressure for Best Buy to make adjustments. At the same time, analysts say, Best Buy's new store-within-a-store concepts are helping to revitalize the shopping experience, which should help drive more traffic and sales.