Just a year ago, electronic retail giant Best Buy (NYSE: BBY) appeared headed to a major change, going private and trimming down. Well, what a difference a year makes.
Richard Schulze, the founder and a major shareholder of the firm has disclosed plans to offload part of his shares as per the company’s regulatory filing with the Securities and Exchange Commission. According to the filing, the sale will occur in a pre-arranged manner over a six-month period commencing from Oct 1, 2013. Shares will be divested in the open market at the prevalent market prices. Schulze holds about 20% stake in Best Buy, which is nearly 70 million shares. However, the number of shares to be sold has not been disclosed yet.
In the past, Schulze had tried to take over Best Buy in a private buyout deal. However, the deal did not materialize. Later, he became the company’s chairman emeritus (an honorary designation) and appointed two people to the board of directors. Best Buy has performed extraordinarily well in the past year, and the stock price has reflected that, up almost 207% in fact. The firm is growing store within a store model for Samsung and Microsoft products, and aggressively cutting costs in an effort to get and remain profitable. While e-commerce competition from the likes of Amazon (NASD: AMZN) has been troublesome, the Best Buy experience that allows consumers to see, touch, and feel the devices, and walk out of the store with it right then and there give them a valuable competitive advantage. With price match guarantee, they also can be competitive for the increasingly price conscious consumer segment.
With the stock price up so much, it is a good time for Schulze to sell, and removes the Damocles that has been hanging over the firm for so many years. Best Buy must now focus on forging a new path ahead. Circuit City, once it’s largest competitor is now long gone, leaving discount retailers like Wal-Mart (NYSE: WMT) and Target (NYSE: TGT), along with the e-commerce sites like Amazon all fending for market share. As an electronic retail specialist their scope is smaller than each of the other aforementioned competitors, and that should give them the advantage of focus and specialization that could allow them to return to the glory they once held. The stock price may face some tough times in the coming months due to the increased volume from Schulze’s shares, but hopefully they can soon put this behind them.
