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Shares of Best Buy Hit a New High

Zacks Equity Research

Shares of Best Buy Company Inc. (BBY) reached a new 52-week high of $25.46 on Friday, Apr 5, owing to the company’s strategic initiatives aimed at enhancing its long-term profitability. This is evident from the company’s decision to open "Samsung Experience Shops" within its stores, as reported by Bloomberg.

Shares eventually closed at $25.45, rising approximately 117.2% year to date. Best Buy currently trades at a forward P/E of 11.65x, a 2.5% discount to the peer group average of 11.95x.

Best Buy’s strategic initiatives, including its price match policy, multi channel strategy, lucrative assortments, multi-year cost reduction program and employee training are aiding it in its turnaround process.

Management has initiated a multi-year cost reduction program, and anticipates savings of $800 million by fiscal 2015. Moreover, the company aims to generate higher profit per square foot through its efficient supply chain management and will largely focus on high margin merchandises.

This Zacks Rank #3 (Hold) stock intends to optimize its portfolio of stores, which includes closing of some big box stores, revamping of stores with a new Connected Store format, adding Best Buy Mobile stand-alone locations and enhancing its .com business.

Despite several initiatives taken by Best Buy to uplift its performance, the first-quarter of fiscal 2014 remains challenged as domestic revenues will be pressured on account of Pre-Super Bowl sales shifting to the fourth-quarter of fiscal 2013. Moreover, increased marketing expenses and its competitive pricing policies could impact its results negatively.  

Besides Best Buy, companies such as Tractor Supply Company (TSCO), CMS Energy Corporation (CMS) and Fifth & Pacific Companies, Inc. (FNP) achieved new 52-week highs of $106.27, $28.26 and $21.07, respectively, on Friday, Apr 5.

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