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Best Buy Co., Inc. (BBY): Explaining Its Great Week

Best Buy Co., Inc.I’m no fan of Best Buy Co., Inc. (NYSE:BBY). Not only do I find shopping at its locations to be a typically underwhelming experience, but there just doesn’t seem to be a lot of hope for its business model going forward. Where nonperishable commodities are involved, the only rational conclusion is that the Internet will prevail.

That being said, I feel obligated to give credit where credit is due. Over the past week, the electronics giant turned in one of the best performances on the S&P 500 , finishing up by nearly 13% compared with a 1.75% gain for the index itself.

The impetus for the move came on Friday, with the company’s announcement that it had reached an agreement to sell its 50% stake in Best Buy Europe for $775 million. As my colleague Adam Levine-Weinberg discussed here, the venture was a dual undertaking with the United Kingdom’s Carphone Warehouse, which will now assume full control of the European operations.

According to Hubert Joly, president and chief executive officer of Best Buy Co., Inc. (NYSE:BBY), “This transaction allows us to (1) simplify our business; (2) substantially improve our return on invested capital, one of the five pillars of our Renew Blue transformation; and (3) strengthen our balance sheet.”

For those of you who have followed Best Buy Co., Inc. (NYSE:BBY)’s fight to stay relevant since the introduction and growth of e-commerce, this news probably comes as welcome relief.

It’s no exaggeration to say that the company has had a rough year. At about this time last year, CEO Brian Dunn resigned after accusations of an inappropriate relationship with a subordinate surfaced. One month later, its founder and chairman, Richard Schulze, followed suit once it came to light that he was aware of Dunn’s relationship but had done nothing about it. Schulze then staged and subsequently abandoned an attempt to take the company private. And most recently, he was asked to rejoin the board as chairman emeritus, bringing along two of his colleagues from Best Buy Co., Inc. (NYSE:BBY)’s brighter days.

Under Joly, who was hired following Dunn’s departure, Friday’s announcement is now the second tangible step forward. The first was last month’s news that Samsung will install semi-autonomous stores within all Best Buy Co., Inc. (NYSE:BBY) locations. As I noted at the time, it was a no-brainer for the bricks-and-mortar retailer that’s struggled to get customers in its doors.

But will these moves, along with Joly’s Renew Blue program, be enough to stave off an otherwise inevitable decline? That remains to be seen — though I’ll be the first to admit that I’m not optimistic.

The article Explaining Best Buy’s Great Week originally appeared on and is written by John Maxfield.

John Maxfield and The Motley Fool have no position in any of the stocks mentioned.

Copyright © 1995 – 2013 The Motley Fool, LLC. All rights reserved. The Motley Fool has a disclosure policy.

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