Will Best Buy Surprise When Earnings are Released Thursday?
Budget-conscious customers have been using Best Buy’s brick-and-mortar locations to test out electronics before purchasing them from Internet retailers like Amazon at a lower price, a practice known as showrooming. Analysts and company executives blamed much of the retailer’s abysmal third-quarter results on this practice.
However, Best Buy’s price-matching policy has somewhat alleviated the effects of showrooming. Shares sunk as low as $11.20 back in December before Joly’s efforts to stabilize holiday sales with discounts and price-matching sent them back up modestly. While price-matching may bring in more sales, the strategy could hurt the company’s margins over the long term. That metric is what analysts will be closely examining once earnings are released.
“If you price-match and discount, you either cut expenses by an equal amount or end up producing lower returns,” University of Michigan law and business professor Erik Gordon told Bloomberg by e-mail.
Thursday could potentially be a big day for Best Buy as it is also the deadline for the company’s founder Richard Schulze to make his updated offer to take the electronics retailer private. He made his initial offer of $24 to $26 per share — which was rejected by the board — last August.
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