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Stock of the Week: Best Buy

Why they're not only surviving, but stronger.

Andrew Willis 6 June, 2022 | 4:48AM
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Andrew Willis: When the pandemic hit, physical retail took a hit. Remember the lines outside of big box stores, letting in only a few customers at a time? The experience was painful for Best Buy (BBY), but it helped drive the business to change in ways that align with permanent changes among tech shoppers.

Customers now demand multi-channel access, quick fulfillment and tech solutions support more than ever. And Best Buy checks the boxes. Equity analyst Sean Dunlop says the retailer has emerged from the pandemic a structurally stronger business. The firm’s digital business now accounts for 31%, doubling over two years, and it’s leveraging its physical footprint for fulfillment and post-sale service – which is difficult for the likes of Amazon to do.

Best Buy’s strategic positioning continues to resonate post-pandemic, while at the same time, the company recognizes the need for some fine-tuning, experimenting with newer store formats and airport vending machines as the future of physical stores don’t need to be ‘big box’ or ‘one-size-fits-all’.

Investors should also consider other formats for Best Buy services, such as subscriptions and off-site service through a network of 20,000 Geek Squad agents, and the firm's ‘Totaltech’ program in the U.S. which provides unlimited home tech support, free delivery, installation and extended warranties to now more than 4.5 million members.

Looking ahead, investors should keep an eye on inflation and consumer pressure around electronics, but we expect strong results in the long term. The company could be one of the best buys in the sector.

For Morningstar, I’m Andrew Willis.

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Securities Mentioned in Article

Security NamePriceChange (%)Morningstar Rating
Best Buy Co Inc82.09 USD1.06Rating

About Author

Andrew Willis

Andrew Willis  is Senior Editor at Morningstar.ca. He previously produced content for Fidelity Investments and finance events for Euromoney Institutional Investor and has written in the past for Thomson Reuters and CNN. Follow him on Twitter @AndrewWillisCDN.

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