Best Buy's Turnaround Story

I really thought Amazon.com was going to eat Best Buy for dinner after they ate Circuit City for lunch in 2009. Best Buy had internal problems as well. You see, former Chief Executive Officer Brian Dunn had an affair with and a company colleague. But then on August 17, 2012, Hurbert Joly resigned from his position with Carlson to take the position of CEO at Best Buy, Inc. and that was the catalyst for the company’s turnaround.

Best Buy's prices weren't competitive. Customers would go to the store, touch and feel the product, then buy it online. So Best Buy implemented a price-matching policy, both in-store and online, while also lowering its prices to be more competitive.

Hubert then cut $1 billion in cost. He strategically laid off managers and staff at corporate, but spent money on employee training to provide top notch customer service and experiences within the store.

Best Buy started shipping directly from the stores with the store employees packing and shipping online orders which gave customers access to more product and inventory and reduced shipping time and cost.

Hubert Joy expanded Best Buy’s services, which included an in-home advisory service. Consumers got a free consultation on how to connect all the products in their homes, including TVs, computers, video games, thermostats and home-security networks, etc. which led to consumers buying more products or services.

This past week, Best Buy acquired GreatCall, a health technology co. that offers mobile products and wearables that connect users to agents who can hook them up with family caregivers or send emergency medical help. This is part of Best Buy 2020 strategy that aims to help customers use technology to address key human needs.

These changes, along with the recent acquisition, not only saved Best Buy's existence, but put them in a position to compete with Amazon. As a result, Best Buy’s investors have been rewarded. So with the turnaround story complete, where is the stock price heading, lets go to the charts?

Monthly Chart (Curve Timeframe) – their is no monthly supply as price is at all time highs, while the monthly demand is $55.

Weekly Chart (Trend Timeframe) - the trend is sideways, but price is sitting in a weekly supply at $79. Two interesting things are going on, price made a triple top and the RSI is showing negative divergence. I can also say that there are potentially no more sellers at this level, meaning there are no more sellers to prevent price from going higher. Pending your trading style, you draw your own conclusion. Because earnings announcement is on 8/28 and because I'm a conservative trader, the chart suggest to wait for confirmation before trading Best Buy again.

This post is my personal opinion. I’m not a financial advisor, this isn't financial advise. Do your own research before making investment decisions.

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by rollandthomas

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