Lioness Associates, Inc.

Economic & Corporate Risk/Yield Reports

November 2, 2012  -- Best Buy Risk/Yield Update for 2012

Refer to Reading Graphs for information on interpretation of the graphs.

The December 2012 period is likely to revisit the direction of this company and whether it will be taken private.  There is also some indication that products will undergo reexamination in addition to determining what role technical support will play in the company.  It's likely that store closings will impact revenue but, hard to identify to what extent —it could be that being smaller might provide more avenues for profitability but, then again, maybe not.

One difficult configuration that has been in play for about 2 years is loosening it's grip and as a result, the holiday season might be more profitable than expected. 

One factor that still exists is online sales from competitors eating into Best Buy's revenue.  This company has announced some marketing campaigns such as online matching of prices for certain products and it will be interesting to see if this has an impact. 

There can be different interpretations to astrological configurations just as economists might have different opinions on what economic data is suggesting.  In this case, my opinion is that there is a high probability that Best Buy will be taken private.  It appears that the financing portion of this would be in play from January to March 2013 and the deal would be completed by the June timeframe.


April 18, 2012  -- Best Buy Risk/Yield for 2012

Uncertainty seems to be one of the keywords at Best Buy with the recent loss of the CEO due to questionable activities.  Possible candidates that surface around June to September time frame may not make the cut and there are indications that it might take until December to fill the vacancy. Expect more "news" about the reasons that the CEO left around the June period and it looks like the news will not have a positive impact but, it is likely to be of a limited impact.

A good portion of the "risk" in the September period is likely the result of Best Buy adjusting their business structure and goals to fit a "reduced footprint" and there could be some issues arising from lack of staff to service the "back to school crowd".  With no permanent CEO at the helm, it's not impossible to imagine a lack of focus in the company direction. Note, it's worthwhile to note that some of the "risk" at the September time frame is a result of dealing with the last remaining issues from the past "CEO situation" and moving past it and hopefully to a fresh start later in the year.

The next earnings scheduled for around May 22, 2012 may have some positives as a result of the store closings.  I wouldn't be surprised if analysts are talking about this company in July/August as starting to turn a corner but, that would be a bit too soon for optimism.  The BBY Risk/Yield 2012 graph does have a slight movement into "Yield" in the June time frame but, it is as a result of the "risk" factors diminishing rather than "yield" factors increasing.

The holiday season, though still far away, looks like it could have potential - we'll have to revisit this company in the fall and take a closer look at what occurred in the interim. As a note, it doesn't look like there are acquisition activities in the short term.

         Best Buy Core/Transient 2012 graph

        Best Buy Risk/Yield 2012 graph

Disclosure as of 4/18/2012 - Best Buy (BBY) is not part of our portfolio at this time.