Where Will Best Buy Be in 1 Year?

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Best Buy (NYSE: BBY) bargained its way into success during the pandemic. Thanks to its retail positioning and an unexpected surge in the demand for electronics, Best Buy saw its revenue and earnings spike amid business restrictions. But Best Buy’s share price did not seem to reflect these gains. With COVID-19-related restrictions now likely to recede, let’s see what the next year might hold for this retail stock

Despite its recent performance, Best Buy is an underappreciated star in retail. Under CEO Corie Barry, the company shifted more company sales and customer interactions online as the pandemic hit. Best Buy also benefited from higher sales across nearly all product categories. Even after enduring forced closures for much of the year, the company managed to increase its net earnings per share by 23% for the first nine months of the current fiscal year.

On top of the increased sales, the company fattened its profits by cutting sales, general, and administrative (SG&A) expenses in the first and second quarters. The company achieved those cuts by slashing labor, incentive, and ad expenses. However, after second-quarter earnings, the company announced that it had backtracked on these cuts as stores resumed operations. In the latest quarter, SG&A expenses rose 8% from year-ago levels. These rising expenses indicate that the company may not sustain its current profit growth levels.

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