Best Buy Co., Inc. (BBY), Amazon.com, Inc. (AMZN): Improving Results Won’t Mean Anything Unless These Issues Are Addressed

Second, if Best Buy is serious about “optimizing the allocation of retail floor space,” they need to decide if they are going to compete at all in “non-core areas.” This isn’t something a company can do halfway. It’s not a surprise when Amazon.com, Inc. (NASDAQ:AMZN) reports a 30% increase in merchandise sales, Walmart says it took electronics market share, and GameStop steals game sales, that Best Buy’s Consumer Electronics and Entertainment divisions are performing poorly.

You Can’t Fake This

Best Buy can’t accept slight improvements and expect customers to come racing back into the store. On a cash flow basis, Best Buy produced just $0.01 of free cash flow per dollar of sales in the last quarter. By comparison, Walmart produced almost $0.03 of free cash flow per dollar of sales, and GameStop produced an impressive $0.13.

The point is, Best Buy’s slight improvements are only putting it on par with the cash flow of a much faster growing retailer (Amazon). The company needs to make some hard choices, and now is the time. If management isn’t more aggressive, it won’t matter what Best Buy does, their competition will continue to steal their business, and this stock won’t be a best buy for anyone.

The article Improving Results Won’t Mean Anything Unless These 3 Issues Are Addressed originally appeared on Fool.com and is written by Chad Henage.

Chad is a member of The Motley Fool Blog Network — entries represent the personal opinion of the blogger and are not formally edited.

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