Best Buy Co., Inc. (NYSE:BBY) is the top-performing stock on the S&P 500 this year, up more than 117% since the beginning of January. But don’t let that performance fool you. This is an ailing retailer to avoid like the plague.
Shares have rallied since last week’s announcement that Samsung is installing semi-autonomous stores within each of the electronic retailer’s big-box locations. The thought process here is simple: Best Buy has struggled over the past few years with lagging sales, and it needed some type of lift.
As an analyst told Forbes magazine: “[T]he Samsung partnership may boost Best Buy’s service experience to electronics customers and help to eventually increase profit margins. If the combined service with Samsung increases customer traffic, it could help Best Buy win back leverage from suppliers such as Apple Inc. (NASDAQ:AAPL), boosting overall profits.”
That’s a big “if,” particularly given Best Buy Co., Inc. (NYSE:BBY)’s track record when it comes to customer service.
More importantly, however, neither the Samsung agreement nor investors’ mercy on its stock since the beginning of the year changes one critical fact: For most consumers, electronics are a commodity. As a result, price is the primary factor that dictates where people purchase them, and that accordingly channels potential Best Buy customers to the likes of Amazon.com, Inc. (NASDAQ:AMZN) and Costco Wholesale Corporation (NASDAQ:COST).
It’s true that Best Buy Co., Inc. (NYSE:BBY) is now offering to match online prices. But all that does is transfer the pain from its top line down to its bottom line by way of the profit margin — not something that would help Best Buy stock in any way, shape, or form.
Beyond all this, the executive leadership has been in a state of flux for some time now. A year ago this month, CEO Brian Dunn “resigned” after the head of human resources was said to have uncovered an affair between Dunn and a younger employee. The following month, its founder and chairman, Richard Schulze, was forced out for his failure to take action. Schulze subsequently mounted a failed attempt to take the company private before being invited back as chairman emeritus. And in the midst of all of this, the remaining board members hired a replacement CEO with no discernible retail experience.
Suffice it to say, this doesn’t paint a pretty picture for the future success of Best Buy Co., Inc. (NYSE:BBY) stock regardless of its recent performance. If you’re looking for odds like these, in other words, you’re better off going to Vegas, where at least you get free drinks.
The article Best Buy Stock Should Be Avoided originally appeared on Fool.com.
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