Amazon’s rise to become the second most valuable publicly traded company in the world has had many predicting the end for brick and mortar shopping in the United States. For some companies, the predictions of doom have been accurate, with previous market leaders like Sears falling into near collapse. However, despite some businesses failing to adapt to a changing landscape, there are some that are evolving with the times. Best Buy is one example, and it’s currently the benchmark that proves brick and mortar retailers can still exist in the age of ecommerce.
Adaptation is Key
The savviest investors are those that look deeper than the price charts. While Best Buy might not be the biggest company traded on Wall Street right now, there’s a strong argument for investing in this well-established business.
The financials are important and can provide context. In 2014, Best Buy collected sales revenue of $42.41 Billion. For the following three years, that figure declined. That all changed by the end of FY18, when the company posted sales revenue of $42.15 Billion. It was a 6.97% increase on sales from the previous year, and the only time in the last five years that the company reported strong revenue growth.
Due to the company becoming leaner and more efficient, gross income reached a five-year peak. After outgoings, Best Buy reported $9.88 Billion of income at the end of the last fiscal year.
Adaptation has been key to this turnaround. Best Buy has embraced the online model while shrinking their showrooms and using them as pick-up and shipping hubs. Stocking the most common high margin products in physical stores provides convenience to shoppers. A wider selection online provides an alternative for those who prefer the ecommerce model.
Online sales grew 10% in the last year, signifying that the company made a smart and calculated decision. If Best Buy continues their momentum now (growth has occurred for six straight quarters), then they could become one of the few retail giants that can stand with Amazon in the age of digital commerce.
Best Buy Stock Performance in 2018
Best Buy’s resilience, turnaround in revenue, and strong market position has led to a surge in investor confidence.
- 3 Month growth is 11.45%
- YTD growth is 13.29%
- 1 Year growth is 43.14%
If your portfolio is heavy in tech and lacking a retail stock, then Best Buy is one of the strongest options today.
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