For the fourth quarter of 2018, the company&a;nbsp;reported $42.1 billion in revenue,&l;span&g;&a;nbsp; &l;/span&g;$2.72 in non-GAAP earnings per share, and an 11% dividend increase.
That&a;rsquo;s certainly a big turnaround from almost a decade ago when Best Buy was under pressure from online giant Amazon, fighting for its survival.
Wall Street took notice, helping the company&a;rsquo;s shares rise almost 6-fold from the 2012 lows, and trade near its ten-year high.
Best Buy&a;rsquo;s big turnaround&a;nbsp;isn&a;rsquo;t spontaneous good fortune. &l;span&g;&a;nbsp;&l;/span&g;It is the result of a smart strategy &a;mdash;&a;nbsp;&l;a href=&q;https://users/pmourdou/Downloads/BBY%20Fiscal%202014%20Annual%20Report.pd&q; target=&q;_blank&q;&g;Renew Blu&l;/a&g;e&a;nbsp;&a;ndash;&a;nbsp;launched five years ago, which helped the company capitalize&a;nbsp;on its two competitive advantages, scale and location, to fend off competition from Amazon.
&l;img class=&q;size-large wp-image-19578&q; src=&q;http://blogs-images.forbes.com/panosmourdoukoutas/files/2019/03/koyfin_20190302_104323975-1200x600.jpg?width=960&q; alt=&q;&q; data-height=&q;600&q; data-width=&q;1200&q;&g; Best Buy Revenues
&l;img class=&q;size-large wp-image-19579&q; src=&q;http://blogs-images.forbes.com/panosmourdoukoutas/files/2019/03/koyfin_20190302_104208596-1200x600.jpg?width=960&q; alt=&q;&q; data-height=&q;600&q; data-width=&q;1200&q;&g; Best Buy Shares on Wall Street
&a;ldquo;The company has made significant strides in improving the customer store experience, being more price competitive, and having a really good online capability,&a;rdquo; says&l;span&g;&a;nbsp; &l;/span&g;Jeffrey Eglow, Chief Investment Officer for Guardian Wealth Advisory. &a;ldquo;The retail industry is not dead so long as you stay one step ahead of Amazon and make sure you are relevant. &a;ldquo;
Here&a;rsquo;s how it happened.
Once&a;mdash;before&a;nbsp;Amazon&a;nbsp;invaded electronics commerce &a;mdash;&a;nbsp;Best Buy was growing bigger and better, benefiting from scale (bigger stores) in prime locations. Revenues, profits and stock prices&a;nbsp;soared, catching the attention of&a;nbsp;business&a;nbsp;strategists and Wall Street analysts.
After&a;nbsp;Amazon&a;rsquo;s arrival, however, the game changed.&a;nbsp;Best Buy&a;rsquo;s most important assets&a;mdash;location and scale&a;mdash;turned&a;nbsp;into liabilities.&a;nbsp;In what has come to be known as &a;ldquo;show-rooming,&a;rdquo; customers did their window-shopping at&a;nbsp;Best Buy,&a;nbsp;and their actual shopping at&a;nbsp;Amazon.com&a;nbsp;&a;mdash; which offered better price deals than&a;nbsp;Best Buy.
Best Buy&a;rsquo;s revenues, profits, and stock headed south.&a;nbsp;And business strategists and stock analysts&a;mdash;some here at Forbes&a;mdash;predicted the slow death of the company.
Renew Blue changed the game. It helped Best Buy capitalize again on the benefits of scale and location -- in several ways. One of them was the introduction of matching prices policy. This was helped by a push in certain &l;span&g;&a;nbsp;&l;/span&g;states to have on-line retailers collect&a;nbsp;&l;a href=&q;http://online.wsj.com/article/SB20001424127887323916304578403073398789876.html?mod=ITP_marketplace_1&q; target=&q;_blank&q;&g;taxes&l;/a&g;, narrowing the gap between on-line and in-store sales.
Then too, there was the use of stores as both warehouses and pick-up places to speed up delivery for on-line shoppers.
And there was expansion of product offerings in each store location to catch up with emerging trends in consumer electronics -- like home theaters and computing, health technology solutions, and assured living.
Wait, there&s;s more. The concept of stores-within-stores,&a;nbsp;with&a;nbsp;Korean electronics giant Samsung and&a;nbsp;Microsoft&a;nbsp;opening up in&a;nbsp;Best Buy&a;nbsp;stores&a;mdash;in essence shifted the cost of show-rooming to these manufacturers.
The rest is history. Samsung and Microsoft were followed by Google, turning the partnership Best-Buy and electronics vendors into a form of &a;ldquo;collective entrepreneurship.&a;rdquo;
That&a;rsquo;s a business model which&a;nbsp;allows the two sides to share the risks and rewards of getting closer to the customer.
Meanwhile, the company continues to reap the synergies associated with increased customer traffic &a;mdash; and the efficient and effective deployment of its Geek Squad to customers who buy flat panel TVs and other accessories that need installation services.
Still, Best Buy is in a cyclical and highly competitive industry in which the growing use of mobile Internet is eliminating boundaries between e-commerce and traditional commerce, depressing prices and margins across industries and sectors.
That&a;rsquo;s why investors should be very cautious before buying Best Buy&a;rsquo;s stock, especially after the recent big run up.&l;/p&g;
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