Tomahawk, WI 01/17/2014 (BasicsMedia) – Best Buy Co., Inc. (NYSE:BBY) is no longer enjoying its time in business. The company is confronted by competition left, right and center and even its profit margins are weakening with speed. It is easy to forget that this was one of the best stocks in the past few years.

To say that Best Buy is staring at a bleak future is a cheap talk unless that assertion is backed by facts. Well, of course, this is the gist of this article. We start by noticing that Best Buy Co., Inc. (NYSE:BBY) dropped its biggest on Thursday January 17, since August 2002. The stock lost nearly 30 percent of its value at the close of the session.

The reason for the stock’s plunge was the lackluster performance in the busy holiday season of December. As a result of this dismal performance, the company took the pain too far to say that it expected a beaten down Q4. The reaction that investors took to send the stock down on the browsers made it hard to believe that Best Buy Co., Inc. (NYSE:BBY) up until recently was regarded as among the 10 best-performing stocks of 2013, having bulged more than 250 percent in the year.

Holiday performance

Best Buy Co., Inc. (NYSE:BBY) reported that for the crucial holiday season spanning nine weeks, a time when stores can make up to 40 of their annual revenue, sales dipped across its various operations such as stores, call centers and websites. This happened at a time when analysts had hoped that the company would turn positive sales in the season. It is thus easy to understand why investors reacted by sending down the stock to historic lows in a single session.

It was not Best Buy Co., Inc. (NYSE:BBY) alone that suffered poor holiday sales. The money-losing retailer J.C. Penney Company, Inc. (NYSE:JCP) also performed dismally that it decided to conceal its holiday sales figures.

Impact

It has been mentioned that Best Buy Co., Inc. (NYSE:BBY) expects the poor performance noted in December to negatively impact its Q4 earnings metric.

Nonetheless, it is important to note that the company’s December sales were impacted by steep price cuts in stores and competitive pricing strategy. Although these were efforts that should have resulted in getting more shoppers to the store, they ended up working to the disadvantage of the company by trimming revenue and margins.

That Best Buy Co., Inc. (NYSE:BBY) is looking forward to unpopular Q4 was confirmed by the company’s CEO Hubert Joly who said that the price tweaks which the company undertook in December and the preceding holiday season came at a higher cost than was expected.

Key takeaway

Competition in the retail industry is not going away and this is why Best Buy Co., Inc. (NYSE:BBY) is in a very awkward position given that the management seems to be herding cats when it comes to combating competition.

While Internet has proven to be one of the company’s bright spots, there are a lot of doubts whether the company will be able to take on the might of Amazon.com Inc (NASDAQ:AMZN) and eBay Inc (NASDAQ:EBAY) in online retail space.

Investing in Best Buy

Best Buy Co., Inc. (NYSE:BBY) doesn’t seem to offer any long-term hopes. However, shorts can still make money with the stock. In fact the nosedive noted in the stock makes it cheap for uptake by short players.

 

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