"Showrooming" Hurts Best Buy ... The Retailer's Future Looks Glum

A few years ago, Circuit City bit the dust. As Best Buy's natural competitor, things looked good for the survivor.

Not so fast, said customers and "unnatural" competitors.

So Best Buy began a long decline instead taking a victory lap, and this morning's latest earnings announcement from the company doesn't bode well for Best Buy's future.

Creative destruction and customer supremacy rule in a highly competitive marketplace. And highly competitive is exactly what today's retailing environment looks like.

Best Buy Reports 3rd-Quarter Loss has the news:

"Best Buy Co. reported another dismal quarter on Tuesday, recording a loss in the third quarter, hurt by a continued sales slump and charges related to restructuring.

Shares fell more than (14%) in morning trading to its lowest level in more than a decade.

The electronics chain is struggling to reverse a years long decline in its business as competition from online stores and discounters increases, and consumers' tastes shift from more profitable items like TVs and desktop computers toward less profitable smartphones and tablets.

In addition, it's facing a growing number of consumers who are "showrooming," going to Best Buy stores to check out merchandise but buying it elsewhere ....

"In-line with trends experienced over the last three years, Best Buy's third quarter financial performance was clearly unsatisfactory," said CEO Hubert Joly, a turnaround expert tapped in August to help improve results. . . .

"The results we are reporting today only strengthen our sense of urgency and purpose," Joly added....

Revenue in stores open at least one year continued to slide, down 4.3 percent for the quarter. The measure is an important gauge of a retailer's financial health because it excludes results from stores that open or close during the period.

Sales growth in mobile phones, appliances and tablets and e-readers was offset by weakness in notebook computers, video games, digital cameras and TVs."

Summing Up

The bad news from Best Buy just keeps coming as same store sales decreased by 4.3%.

Customers are buying elsewhere and sales declines are one thing companies can't overcome with cost efficiencies and productivity gains.

It looks like Best Buy will struggle for years to get back on its feet, let alone thrive.

It's a worrisome situation indeed, and the company obviously hasn't found the solution to its competitive woes.

We'll stay tuned but only as a Best Buy observer and not an investor.

Thanks. Bob.