Best Buy Isn't Making Excuses
Best Buy is taking advantage of the weak U.S. dollar and expanding its business internationally, Cramer said Monday on Mad Money.
While Circuit City is out making excuses for its dismal performance, blaming the American consumer for not spending enough, Best Buy has left its competitors in the dust, seeking out new customers in countries like Canada and China.
Everyone else is fretting about the Canadian dollar now surpassing the U.S. dollar in value. Everyone but Best Buy, that is. Now every dollar the company earns in Canada is worth more than it was when it converts them back into U.S. dollar-denominated profits.
Five years ago, BBY’s operating profits in Canada were just around .5% of its sales. Now they are reaching 4%. That may not seem like a lot to the naked eye, Cramer said, but it's actually huge expansion. And the retailer recently bought a chain of electronic stores in China called Five Star, further expanding its international footprint. Best Buy is by no means a true ROW (rest-of-world) player, but it is aspiring to be one, and that’s just fine by Cramer. Right now the company’s sales are about 80% domestic and 20% international. Those sales are expected to be split 50/50 by 2010 – a “pretty swift” change, Cramer said.
Best Buy is also casting an eye on countries like Turkey and Mexico. The company’s big picture strategy is clearly to take what it has learned about doing business in the U.S. and apply that to foreign countries, Cramer said. And it’s not a bad strategy, considering its 16.3% gain in same-store sales. “That’s not a number that you need to make excuses for.”
But BBY is still first and foremost an American company. It needed last week’s rate cut and Cramer thinks its American business won’t suffer because television, game and navigation system prices are all holding up well and in strong demand. Also, Best Buy’s board just approved a $5.5 billion buyback and it currently has $2.9 billion of that left. With a $22 billion market cap, the remainder of the buyback alone is enough to repurchase 13% of the company. “That is good enough reason to own Best Buy,” Cramer said.
But the bottom line is that if investors are sick of low growth in the U.S. they can put their money in companies that fail and then make excuses – or they can can stick with a name like Best Buy, which makes sure it doesn’t have to make excuses.
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