Best Buy (BBY) pops, jumps 21% on increased sales

08/24/2016

Electronics retailer Best Buy (BBY) is generally a horrible stock to own. Retail is dying quickly, their advertising is the worst, it’s a terrible place to have to shop, Amazon has the e-commerce game sewn up, and the staples of Best Buy’s once dominant offerings – video games and cellphones – are increasingly things people don’t go to a big box store to buy.

Heck, look over Best Buy’s video game offerings next time you’re in store. It’s like the last days of Target Canada in there right now. No selection, everything marked down, nothing new. I mean, the last three games I bought came from online purchases, so what’s Best Buy’s future going to look like?

Well, if yesterday is anything to go on, it won’t be bricks and mortar. Driving a significant boost in sales, which rocketed the stock 21%, is apparently its online business, which the company says is growing because their system is better than it used to be, the checkout process is smoother, and their staff are better trained.

Bullshit. I’ll tell you right now what’s driving those sales, and it’s not what Best Buy is telling you.

It’s Pokemon Go.

pokemon

I’ve been into three different Best Buy stores in the last few months and in every store, the power pack/mobile charger section is empty. Not mostly empty or kinda empty but zombie wasteland EMPTY. Nothing on the shelves. It’s all gone.

We’re talking around 300 battery packs priced at an average of $80, per store. That’s $24 million across 1050 stores. Assuming it takes a week to get in more, and the game has been out six weeks now, that’s potentially $151 million in battery pack sales that didn’t exist previously.

Now, the company isn’t going to tell you that it’s killing it in that area because the last thing it wants is competition. So they’ll say ‘our people are more pleasant’ and ‘our website is ginchy’, but it’s down to freaking Pokemon, kids.

That’s also driving a spike in cellphone purchases (the company says it’s ‘not doing as poorly as it thought’ on cellphones, which jives with my theory), and there’s probably a related purchases kick on as well (‘We came for a battery pack, there wasn’t any left, so we bought a mobile charger, a drone, and season 3 of The League’), so what you’re looking at right now is a spike that nobody saw coming – but which shouldn’t be chased.

Admittedly, Pokemon is huge right now, but the makers have been far too slow to adapt the game to keep people interested in the sort of huge numbers that were taking part initially, when it was showing more weekly users than Tinder. Now, usership has been pretty much halved and will likely keep slipping, as the ‘everyone’s doing it’ element of the game is increasingly not relevant since not everyone is doing it anymore.

No CEO is going to come out and say a third party product has driven their best quarter in years, so you’ll keep hearing wishy washy ‘training! pretty stores! smooth website!’ bullshit for a while, and I’d expect the next quarter’s numbers to slip back to ‘OMGwhatarewegonnadooooo’ territory quickly enough.

Could I be wrong on this? Why, sure. But I’m not. Look at it – Best Buy’s numbers have been dog doody for years now, and getting doodier. Nobody – but NOBODY – predicted this was going to be a strong quarter – EXCEPT ME. And all of a sudden the numbers spike..

If you listened when I said a few weeks ago that Best Buy was going to have a big ass quarter due to Pokemon, well played on your smart investment and good luck as you sell it off. If you didn’t listen, don’t chase now. The moment has passed. Keep your powder dry and let’s look for the next one.

“Improved website” – gimme a break.

— Chris Parry

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