Best Buy Ripe for Take Over: Bloomberg

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In the latest of negative reports for Best Buy, analysts say the company is ripe for a buy out.

Best BuyThe big box retailer lost almost a third of its market value last year, but it still has a high cash flow.

“…the world’s largest seller of consumer electronics is now valued at just 3.6 times its free cash flow (BBY), the cheapest of any retailer worth more than $1 billion,” said Bloomberg.

Best Buy still produces more free cash flow than any comparable store and it has more cash than debt, which makes it an attractive LBO target,  analysts told Bloomberg.

Best Buy has been reeling from a one-two punch.  There’s no longer a hit, high margin product like TVs to fuel sales.  And competition has grown fierce  from Amazon and Walmart.  Same store sales have fallen in 5 of the 6 past quarters.

Source: Bloomberg

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8 Comments

  1. How ironic is it that one of the biggest internet companies(Sonic Electronic) that is ruining the profit margin for everyone is advertising at the top of the page. Has a owner of a small car audio business, I will be sad to see Best Buy close. My shop is less than a mile away and Best buy\’s poor customer service and high hidden prices is our best sales tool. Best buy is defintely going down the same road as Circuit city. But I wouldnt worry to much, our great government will probably bail them out.

  2. Beas Buy finds itself at the inevitable crossroads that any soulless big-box merchandiser inevitably faces when their unfettered rush to the bottom of the service pyramid finally intersects with the step-off point for consumers whose only motivation is to purchase at the cheapest price. Best Buy’s ‘blue-shirts’ are no longer well trained, highly motivated professional salespeople. Their pay grade doesn’t attract or retain those types. Rather, they are dim-witted frumpy clerks who would rather be doing anything else than working at Best Buy. As a result, Best Buy showrooms have become little more than an opportunity for on-line shoppers to get a quick ‘hands on’ with the product to verify purchase intent before using their i-phones or computers to consummate the actual transaction with an on-line merchant, or to zap the QR code and find an alternate Big Box merchant with an even lower price offer. At this juncture, Best Buy’s is hobbled by its giant real-estate footprint, and its only bet is to seriously step-up the slotting fees it charges its vendors to place merchandise in the stores which, though highly trafficked, are really now just a revolving door for cheapskate shoppers who will purchase elsewhere to save that last nickel. Best Buy is really, now, nothing more than a grocer, selling commodities, at low margins. As such, it will increasingly have to become adept in charging more and more for each square foot of floor space and linear foot of gondola run. Sadly, that strategy, too, will eventually fail–as visualization and virtualization technologies will increasingly make on-line merchandising and product demonstrations so compelling that it’s no longer worth the gasoline money to drive to the BBy showroom at all. Dump the stock, the company won’t be around in any real capacity 4 years from now.

  3. 100% of the blame for the unfair \"no sales tax\" debacle rests with the corrupt politicians and the millions of dollars in bribes they accept from Amazon and the other Internet retailers. \"Let\’s see……. I am a crook anyway….. should I introduce legislation that will garner my state a Billion Dollars or should I just look the other way accept this nice little $200,000 bribe for my self? Hum…..that is a tough choice…… But I am a crooked politician….Hum….???

    Who is going to complain? The customers who are saving tons of money on thier purchases? What a freaking disaster this whole thing is!

  4. These big box stores have a mentality that they can sell a product cheaper than anyone and still cover all their costs. It’s a race to who can make the least amount of profit. Its all about making a quick buck without regard to the health of the industry. As for the internet companies, why wouldn’t a vendor sell to whom ever can move their product the quickest. Unfortunatly these internet vendors have little overhead to cover and thus can sell the product for less. Combine this with a consumer that can save (5%-10%) on not payning sales tax why wouldnt the consumer choose the same product for a cheaper price. This is truley an unfair advantage that legistlation will have to address.

  5. corporate greed & quick sales…. who cares about long term when the guy upstairs makes his millions and lives happily ever after while the worker bees at the bottom go looking for new greeter jobs at walmart!

  6. they started the whole notion of destroying the value of a product. Once you go down that road,its tough to change directions. Karma is a (*&^%$

  7. If the manufacturer of these products would stop allowing online places like Amazon and others to destroy the value, this would’nt happen!

  8. I’ll make this short, if the world of the electronic retailer would STOP
    Blowing prices out this wouldnt happen to best buy.
    Let’s get together and stop the NO profit mentality.
    Garz-

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