Best Buy's Busted Bad

It's official: Best Buy (NAS: BBY) is reallygetting killed in the cutthroat retail environment. Not only do I harbor a very negative stance on Best Buy, I plan to underline that by putting an underperform CAPScall on the electronics retailer's stock later today.

The sheer fact that the beginning of Best Buy's fourth-quarter news release includes a litany of items that are part of its "transformation strategy" should give potential investors chills. That implies the results were really ugly.

Best Buy reported a fourth-quarter loss of $1.7 billion, or $4.89 per share, compared to net income of $651 million, or $1.62 per share, this time last year. Restructuring charges savaged the bottom line.

Revenue increased 3% to $16.6 billion, but same-store sales decreased 2.4% from a 4.7% drop this time last year. Also, the results included an extra week, so the sales increase is far less heartening than it appears. And don't forget, these results reflect the all-important holiday quarter.

Best Buy has obviously reached critical condition. The big-box retailer plans to close 50 of its 1,100 stores and will let go 400 workers in the process. "Transformation" efforts will include opening small-box Best Buy Mobile stand-alone stores.

My colleague Rick Munarriz warned about Best Buy's dismal outlook last week, pointing out that an analyst's "neutral" rating certainly sounded a little too mild under the circumstances. Given today's tidings, indeed.

The common meme these days -- that online retailers like Amazon.com (NAS: AMZN) have turned Best Buy into little more than a showroom for customers to look before they purchase at home -- is certainly going around. Things are far more complicated than that, though. At some point, Best Buy lost its roots and with them the hope of bringing something special to the bricks-and-mortar retail experience. That point might have been when former CEO Brad Anderson retired.

Now, Best Buy is just as risky a stock as electronics peddlers Conn's (NAS: CONN) , hhgregg (NYS: HGG) , and RadioShack (NAS: RSH) . The customer-centricity that used to differentiate Best Buy has been lost, and these days, isn't it just another store?

Although Best Buy now trades at just seven times forward earnings, it's no bargain; the forward multiples of RadioShack, Conn's, and hhgregg (nine, 14, and nine, respectively) simply make those electronics retailers look overpriced.

Right now, Best Buy reminds me of another very sad big-box story: Borders. I suspect more downer news and store closings out of Best Buy in the future. That's why I'm putting an underperform on Best Buy; you can track my CAPS record here. Although retail turnarounds are always possible, once the edge is lost, it's hard to get it back again.

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At the time thisarticle was published Alyce Lomax does not own shares of any of the companies mentioned. The Motley Fool owns shares of RadioShack, Amazon.com, and Best Buy. Motley Fool newsletter services have recommended buying shares of Amazon.com and hhgregg. The Motley Fool has a disclosure policy. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. Try any of our Foolish newsletter services free for 30 days.

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