Best Buy (BBY) opened down almost 30% on Thursday.
BBY stock is undoubtedly being weighed down by today’s Best Buy sales report, which showed a decline in same-store sales over the holidays; BBY saw a 0.9% decline in revenue from roughly Thanksgiving to New Year’s despite discounts, which also led management to warn earnings will disappoint.
But today’s Best Buy holiday sales report isn’t earth-shattering. BBY revenue has been challenged for a while, as have earnings. And investors didn’t seem to care a whit about those trends in 2013, as the stock skyrocketed more than 260% despite continued revenue declines.
The real cause of the selloff is that investors who had been riding high on a bull market and short squeeze last year don’t want to get caught holding the bag on BBY stock.
Because Best Buy still sucks, still faces revenue challenges and still can’t grow profits fast enough.
BBY Stock by the Numbers
To be clear, I have no beef with Best Buy retail storefronts. My friend Marc Bastow recently told me he went into a BBY location and had a great experience — the place was clean, the people were friendly and the layout was organized and convenient.
When I say that Best Buy sucks, I’m talking about the numbers … because for BBY stock, those are all that really matter.
And here they are.
It’s a bit weird, because Best Buy just wrapped up fiscal 2014, so it’s a year ahead of the calendar year, but just ignore the fact that the company has a goofy calendar and look at the trend of reported information.
Which is, quite clearly, down.
Sales have declined in five of the last six quarters. And after today’s report, they will assuredly decline again in Q4.
Total revenue is lower than since fiscal 2010, which is actually calendar 2009. So think about that — BBY stock was making more in sales during the Great Recession than it is right now.
Anyway, those folks who misinterpreted the short squeeze at Best Buy last year as signs of a turnaround have now started to realize that it’s all built on thin air. A year ago, short interest was 12.5 million shares — and now, it’s about 4 million as all the bears have capitulated across 2013 and bought BBY stock to cover.
But the bears weren’t necessarily wrong … just early.
Best Buy remains in deep trouble and these holiday sales prove that.
BBY earnings in February are sure to say the same thing, too, and investors don’t want to stick around for the horror show.
Jeff Reeves is the editor of InvestorPlace.com and the author of The Frugal Investor’s Guide to Finding Great Stocks. As of this writing, he did not hold a position in any of the aforementioned securities. Write him at firstname.lastname@example.org or follow him on Twitter via @JeffReevesIP.