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   Non-TechBBY -Best Buy


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To: ChrisGillette who wrote (974)8/1/2013 11:09:06 AM
From: ChrisGillette
   of 980
 
<<Looks like a good short candidate. Any thoughts? IMO, despite the recent hype and run-up in share price, Best Buy continues to face all of the same secular problems that it's faced over the last decade. In short, if Amazon doesn't kill it, then Costco, Walmart, and Target will...>>

Initiated a short position today. Looking for sub-$25.

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To: ChrisGillette who wrote (975)9/3/2013 4:13:48 PM
From: ChrisGillette
   of 980
 
<<Initiated a short position today. Looking for sub-$25.>>

Added to the position today. Still looking for sub-$25.

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To: ChrisGillette who wrote (976)11/18/2013 7:33:00 AM
From: Labrador
   of 980
 
You sticking with that BBY short?

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To: Labrador who wrote (977)11/18/2013 9:30:09 PM
From: ChrisGillette
   of 980
 
<<You sticking with that BBY short?>>

Yes, and will look to increase the position after earnings tomorrow if the stock gets to around $50/share.

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To: ChrisGillette who wrote (978)11/19/2013 8:56:27 AM
From: Labrador
   of 980
 
I don't think that you'll see $50 - BBY is probably heading back to the mid-$30's is my guess. Margin compression is a certainty - it is cut-throat in the markets - just to compete with Amazon as its sales just keep growing and growing with no concerns with margins.

How can BBY compete with Company on the web that cares nothing about profitability at least for years to come?

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To: Labrador who wrote (979)11/19/2013 11:06:05 AM
From: ChrisGillette
   of 980
 
As I commented on another board, we've seen this story before and--regardless of the short-term trading environment--know how it will end.

If it was as simple as price-matching and sub-leasing, then Circuit City, RadioShack, Borders, Barnes and Noble, etc. would have already figured it out.

As you point out, it's difficult to price-match Amazon. Not just because Amazon doesn't care about profits, but also because:
(a) Amazon doesn't have the same fixed-cost structure/baggage
(b) Amazon has much more scale (i.e., operationally more efficient)
(c) Amazon is financially much stronger and more diversified, allowing it to use profits in one area to subsidize losses / price wars in other areas (like it did with diapers.com before acquiring it and like what it's currently doing with Netflix).

But price wars and gross margin aren't Best Buy's only problems.

The fundamental problem is that same store comps continue to decline both domestically and internationally. Last quarter, Best Buy touted that its domestic comp store sales only declined 0.4% YoY while its domestic online sales increased 10.5% YoY. What Best Buy didn't tout (but mentioned as a footnote in its financials) was that its comp store calculation includes online sales and therefore masks the true decline in same store sales.

Further, Best Buy's online strategy will only worsen the same store sales situation. Again, we've seen this story before and my guess is that much of Best Buy's online sales growth will come not at the expense of Amazon but rather at the expense of its own stores (i.e., channel conflict).

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