Best Buy Is Finally Collapsing and I Couldn't Be Happier

A blog about business and economics.
Jan. 16 2014 8:39 AM

Best Buy Shares Collapsing After Bad Holiday Sales

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Best Buy shares were tumbling by 30 percent or more in pre-market trading Thursday morning on holiday sales data* that painted a bleak portrait of the big-box electronics retailer's holiday fortunes. The key takeaway is that U.S. comparable store sales fell 0.9 percent in the nine weeks ending Jan. 4, 2014, with CEO Hubert Joly saying that "aggressive promotional activity in the retail industry during the holiday period" cut into everyone's sales.

In other words, Best Buy and others cut prices to try to stay competitive with Amazon and margins suffered as a result.

I don't exactly want to dance on Best Buy's grave here. Lots of people work in Best Buy shops and it's sad that when any company struggles, innocent people end up losing their jobs. Just look at these J.C. Penney layoffs. At the same time, the Joly-era revival of Best Buy's fortunes during most of 2013 was a genuine economic feel-bad story. Great companies succeed by offering great value propositions to their customers, win-win transactions where everyone ends up happy. Joly boosted Best Buy's share price by slashing costs while maintaining reliance on upselling customers to overpriced accessories. It's a pernicious business model that offers neither the efficiencies of Amazon's e-commerce nor the intensive customer service of the independent electronics retailers that Best Buy displaced. The top performing stocks of 2013 generally painted an optimistic portrait of the American economy. The exception was Best Buy's 239 percent increase.

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To the extent that the Best Buy surge turns out to be something that recedes as quickly as it rose, I'll consider it a triumph of good sense. Friends don't let friends buy $59.99 "high speed" Monster HDMI cables from Best Buy.

*Correction, Jan. 16, 2014: The original version of this post referred to fourth quarter earnings results, which Best Buy has not yet released; today's news relates more narrowly to holiday revenue.

Matthew Yglesias is the executive editor of Vox and author of The Rent Is Too Damn High.

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