Best Buy, Other Turnaround Stocks Lead 2013 Rally

Best Buy, Other Turnaround Stocks Lead 2013 Rally

Some companies that were shunned by investors last year—including Best Buy—saw their shares rise the most during the first quarter.

Best Buy Company, Inc., whose stock was among those that investors loved to hate last year, joined forces with previously maligned stocks to lead a first-quarter rally.

Richfield-based Best Buy saw its stock price plummet about 50 percent in 2012, closing out the year at $11.85. But it climbed 87 percent during the first three months of this year, closing last week at $22.15. Best Buy’s stock was trading up about 0.7 percent at $22.31 late Monday morning.

Best Buy is not the only U.S. stock to see a big turnaround this year. In fact, USA Today recently pointed out that other stocks that were “practically left for dead last year” have been among the biggest winners in 2013. Los Gatos, California-based movie rental and video streaming company Netflix saw its stock jump 104 percent during the first quarter. Palo Alto, California-based computer company Hewlett-Packard, meanwhile, saw its shares rise 67 percent. In fact, Netflix, Best Buy, and Hewlett-Packard saw the biggest first-quarter gains among all of the Standard & Poor’s 500 index, the newspaper reported.

Conversely, a number of hot stocks that attracted investors last year slid during the first quarter. Cupertino, California-based computer and technology company Apple, Inc., for example, saw its stock price drop about 20 percent during the first three months of the year.

In addition to giving the Standard & Poor’s 500 a boost, Best Buy was also among the 10 top-performing stocks in the MSCI All-Country World Index, which includes equities in 45 markets and climbed 6.6 percent during the first quarter, according to a Bloomberg report.

Best Buy’s stock was jump-started in mid-January, when its shares climbed more than 16 percent on news that the company’s same-store sales during the holiday season were essentially flat—welcome news on the heels of several quarters of declines.

The company has been executing a restructuring plan under CEO Hubert Joly, who took the reins in September. In February, Best Buy said it would shutter 15 big-box stores in Canada—and it also announced plans to cut 400 jobs at its Richfield headquarters. The electronics retailer said the layoffs would help it cut about $150 million in costs, but it described the move as an “initial reduction” in the first phase of Joly’s plan, which calls for reducing costs by $725 million.

Also in February, Best Buy announced plans to match prices of local retail competitors and 19 major online competitors, a move it said will help end the practice of “showrooming.”

Best Buy’s stock received another boost on March 1, when the company announced fourth-quarter earnings and sales that topped analysts’ expectations. Revenue totaled $16.7 billion, essentially flat compared to the same period last year. The company’s net loss of $409 million, meanwhile, marked a substantial improvement from a net loss of $1.82 million for the same period a year ago.

For the full year, revenue slid less than 1 percent to $49.62 billion while the company’s loss narrowed from $1.32 billion to $249 million.

Several analysts upgraded Best Buy’s stock rating during the first quarter, crediting the company’s new leadership for helping it achieve early signs of a turnaround.

David Schick, an analyst at St. Louis-based Stifel, Nicolaus & Company, upgraded his rating for Best Buy from “hold” to “buy,” citing “vastly improved management” as a key factor in his upgrade. Alan Rifkin of international investment firm Barclays also lifted his rating for Best Buy, as did Peter Keith of Minneapolis-based Piper Jaffray.

Looking ahead, Best Buy will continue executing its turnaround attempt under Joly, and its months-long saga involving a private takeover attempt appears to have reached its conclusion. At the end of February, a deadline passed for Best Buy founder Richard Schulze to make a buyout bid. And the company announced last week that Schulze has rejoined Best Buy as chairman emeritus. Former Best Buy executives Brad Anderson and Al Lenzmeier, meanwhile, joined the company’s board.

The company has also ended its experimental Geek Squad partnership with Minneapolis-based Target Corporation in order to refocus its efforts on core store operations, according to a Star Tribune report.

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