Aug. 20 - Best Buy's stock has jumped on its recent turnaround efforts- but there are reasons it could lose its spark. Bobbi Rebell reports.
Best Buy looks like the turnaround story of the year- but looks can be deceiving. The electronics retailer reported its first quarterly profit in a year- thanks to some much lauded efforts by its new CEO Hubert Joly. He's slashed costs- cutting jobs and closing stores. And the stock has skyrocketed- up about 160% year to date. And that worries Morningstar's R.J. Hottovy: SOUNDBITE: R.J. HOTTOVY, DIRECTOR, MORNINGSTAR (ENGLISH) SAYING: "There were a lot of costs to be cut in Best Buy's cost structure and I think that the market is rewarding- has rewarded the company for those efforts, but now has overshot that, and maybe getting a little bit too optimistic for a company that still doesn't have any inherent cost advantages over the likes of Amazon, Wal-Mart " Best Buy has been doing a better job with price matching those rivals' online prices- and is revamping its stores and website. It's also letting vendors like Samsung and Microsoft run their own boutiques within its stores- something that could backfire: SOUNDBITE: R.J. HOTTOVY, DIRECTOR, MORNINGSTAR (ENGLISH) SAYING: "I think the store-within-stores from Samsung and Microsoft are a nice touch for the time being and should provide a short term lift in terms of sales, as well as profitability. But at the same time you are also giving the companies like Samsung and Microsoft a blueprint of how they could build their own retail presence. So it comes as a bit of a double edged sword and could potentially come back to hurt them in the long run." Hottovy does like the company's "ship from store" program- which it plans to extend to more than 200 locations in time for the holiday season.