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Best Buy Co Inc BBY

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Morningstar’s Analysis

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Economic Moat


Capital Allocation


Services, Omnichannel Investments Pay Off; Reinstating Best Buy's Moat; Shares Fairly Valued

Sean Dunlop Equity Analyst

Analyst Note

| Sean Dunlop |

We raise our moat rating for Best Buy to narrow from none as we reward the firm for its differentiated customer service model, strong upstream relationships, and process improvements over the last few years, laying the groundwork for sustained success. The demands of the retail customer of the future remain in flux as the dominos fall after COVID-19, but Best Buy's services, vendor relationships, and improving productivity provide a sufficient impetus to reinstate our narrow moat rating after a 12-year hiatus. Consistent with our rating bump, we raise our fair value estimate to $116 per share, up from $101 previously, as the firm's horizon for excess returns (and economic value creation) looks set to persist for the next decade, though we recommend that investors await a larger margin of safety before building a position.

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Company Profile

Business Description

With $47 billion in 2020 sales, Best Buy is the largest pure-play consumer electronics retailer in the U.S., with roughly 10% share of the aggregate market and nearly 40% share of offline sales, per our calculations, CTA industry, and Euromonitor data. The firm generates the bulk of its sales in-store, with mobile phones and tablets, computers, and appliances representing its three largest categories. Recent investments in e-commerce fulfillment, accelerated by the COVID-19 pandemic, have seen the U.S. e-commerce channel roughly double from prepandemic levels, with management estimating that it will represent a mid-30% mix of sales moving forward.

7601 Penn Avenue South
Richfield, MN, 55423
T +1 612 291-1000
Sector Consumer Cyclical
Industry Specialty Retail
Most Recent Earnings Jul 31, 2021
Fiscal Year End Jan 29, 2022
Stock Type Cyclical
Employees 102,000