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Best Buy Co., Inc. (BBY) Stock Soars on Samsung Experience Shop Deal

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On Thursday, Best Buy Co., Inc. (NYSE:BBY) stock climbed 16% following news that Samsung would open “Samsung Experience Shops” in more than 1,400 Best Buy Co., Inc. (NYSE:BBY) stores over the next few months. The first 500 shops will begin opening as early as April 8, according to Bloomberg. This first batch of Samsung Experience Shops will take up approximately 460 square feet of prime space near the front of the Best Buy Co., Inc. (NYSE:BBY) stores, and will feature “Samsung Experience Consultants.” These personnel will be hired and trained by Samsung to assist customers who are interested in Samsung devices.A Samsung Experience Shop prototype. Source: Samsung.

This move appears to be a clear win-win for Samsung and Best Buy Co., Inc. (NYSE:BBY). That said, Best Buy Co., Inc. (NYSE:BBY) stock has really run ahead of the company’s fundamentals. While domestic comparable-store sales increased last quarter — for the first time in more than a year — EPS was still down by 25% year over year. Nevertheless, the stock has more than doubled in the last three months.

BBY Chart

Best Buy 3-month stock chart, data by YCharts.

Best Buy CEO Hubert Joly still has his work cut out for him in his effort to turn the struggling electronics giant around. While Best Buy’s price-matching strategy has made the company more competitive with Amazon.com, Inc. (NASDAQ:AMZN) , Amazon.com, Inc. (NASDAQ:AMZN) is likely to continue chipping away at Best Buy’s electronics market share over time, while pressuring its gross margin. Accordingly, I would view the recent run-up as a good opportunity for shareholders to take profits on Best Buy stock.

Benefits of the partnership
Samsung has made great progress in catching up to Apple Inc. (NASDAQ:AAPL) in the mobile device market over the past few years, but the company has had trouble breaking Apple Inc. (NASDAQ:AAPL)‘s stranglehold on the U.S. market. One of the main barriers for Samsung has been Apple Inc. (NASDAQ:AAPL)‘s strong retail presence in the U.S., where it operates roughly 250 Apple Stores. The knowledgeable staff and strong customer-service orientation of Apple retail stores draws in new customers, and the large U.S. store footprint is a major reason Apple is so dominant here. In fact, the iPhone surpassed 50% market share in the U.S. last fall.

While the Samsung Experience Shops obviously will not be able to provide the same kind of experience as the Apple Store in 460 square feet, they will still vastly improve Samsung’s U.S. retail presence. Samsung will benefit from Best Buy’s strong traffic, but conversely, the Samsung shops may bring new traffic into the stores. Moreover, this partnership highlights the promise of Best Buy’s strategy of reallocating square footage from declining categories like CDs and DVDs toward growth areas like mobile devices.

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