Consumer electronics have replaced apparel as holiday must-haves. And retailers like Best Buy Co. have reaped the benefits.
But Brian Nagel, electronics sales analyst at UBS, says those benefits are proving somewhat elusive this year. He told “Morning Call” that Best Buy’s earnings – which rose 8.7% in the third quarter, ending Nov. 25 -- missed his firm’s expectations, and said its sales for the holiday period so far would have been weaker if not for strong flat-panel television demand.
But Nagel remains optimistic on the company, opining that its troubles came mostly from the gross margin side; he also praises innovations such as its Geek Squad support initiative.
Stephen Baker, vice president of industry analysis-electronics retail at NPD Group, maintains he too “is a half-full guy” regarding Best Buy’s outlook. He cites the threat of Wal-Mart and Circuit City each making deep price cuts on electronic merchandise – then concludes that, despite the resultant damage to Best Buy’s margins, the firms’ price-cutting is a good sign that Best Buy is leading and its rivals are merely reacting.
Full disclosure: Nagel owns Best Buy stock, as do members of his family; the retailer is an investment banking client of UBS; and UBS Securities LLC has received certain compensation from the store-chain company.
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