Best Buy (BBY) Store Remodels are Huge Upgrades; Will Bolster Investor Confidence

December 26, 2012 9:27 AM EST
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Best Buy (NYSE: BBY) is indicated for a higher open following the holiday pause Tuesday, as at least one analyst is bullish on the retailers efforts to revamp is store layout.

Stifel Nicolaus analyst David Schick went to Best Buy locations before and after they were redone. Schick said the new stores were a "real upgrade" from the old setup, which could help sales staff close bigger, better deals.

In addition to a more open floor plan, Schnick notes how companies like Microsoft (Nasdaq: MSFT) and Sony (NYSE: SNE) are pushing to build store-within-a-store segments. Those efforts might also include decent financial incentives for Best Buy.

Schick continued, "We believe store traffic is up (vs. pre-remodel) and Magnolia and Pacific Sales Kitchen & Bath are seeing strong trends in the small sample of stores we have visited. The stores have significantly less exposure to declining categories (such as CDs and DVDs). All in all we see this work as a good development for BBY....Magnolia section is a much bigger departure from BBY stores into high-end home theater. Like kitchen & bath discussed above, presentation of merchandise feels more professional and higher quality."

Some positives investors should look for moving forward would be, of course, another bid from founder Richard Schulze, but also good headlines about the remodels, selling of overseas assets, and an increase in estimates by the Street. Schick is now modeling lower gross margins for this year and next year.

Stifel currently rates Best Buy at Hold. Shares are up about 1 percent early Wednesday.

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connected store
mjb on 2012-12-27 15:39:50
Mark as Spam | Reply to this comment

this model has been around for a few years actually.. Its called the "connected store" model.. One of the first ones was in Pittsburgh... IT WAS A FAILURE!!!

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