Best Buy Case Analysis
Tatiana Ionita
Best Buy Case Analysis
BA 3101/ Professor Monos
2/24/15
Best Buy faces three eminent problems: revenue decline, net profit loss, and poor cash flows. Revenue fell 2.4% in 2011, losing $1.23 billion in 2011. Net profit shrank in the fiscal year 2012 to 1.23 million from a net profit of 1.27 million in 2011, or loss of $3.36 per share. Best Buy’s cash flow decreased from $2.2 million in 2010, to $1.9 million in 2011. This report will conduct a situational analysis for causes of revenue loss, profit decrease, and poor cash flows, including a summary for each problem. In 2011, Best Buy’s revenue dropped 2.4%, following a 4.7% decline from the previous year, and accumulating a loss of $1.23 billion. Best Buy faces revenue problems due to closure of its “big box” stores and a 62% loss of its main revenue generating market, the US. Revenue problems are due to the closure of fifty “big box” stores in the US, as well as additionally closing “big box” stores abroad in the UK, Turkey, and China. The closure of its stores created fewer consumers and a decreasing number of units sold in the previous year, which disrupted revenue growth for the company. In the previous four years, Best Buy saw “17% value CAGR in its internet retailing operations, while store-based retailing has seen a value CAGR of just 6% […] despite this pace of growth internet sales account for only 5% of the company’s total sales value in 2011” (Passport). The remaining 95%, or the bulk of revenue for Best Buy, suffered as it closed down stores, which cut deeply into revenue. The company additionally lost revenue in depletion of its main consumers in the US market. The majority of Best Buy consumers are Americans, who account for 76% of the company’s revenue in 2011, however, by the end of 2011 the US market accounted for only an abysmal 14% of revenue (Passport). With the reduction of the US market, Best Buy faced a 62% loss in its core consumers in 2011. Together, through a reduction of
Best Buy Case Analysis
BA 3101/ Professor Monos
2/24/15
Best Buy faces three eminent problems: revenue decline, net profit loss, and poor cash flows. Revenue fell 2.4% in 2011, losing $1.23 billion in 2011. Net profit shrank in the fiscal year 2012 to 1.23 million from a net profit of 1.27 million in 2011, or loss of $3.36 per share. Best Buy’s cash flow decreased from $2.2 million in 2010, to $1.9 million in 2011. This report will conduct a situational analysis for causes of revenue loss, profit decrease, and poor cash flows, including a summary for each problem. In 2011, Best Buy’s revenue dropped 2.4%, following a 4.7% decline from the previous year, and accumulating a loss of $1.23 billion. Best Buy faces revenue problems due to closure of its “big box” stores and a 62% loss of its main revenue generating market, the US. Revenue problems are due to the closure of fifty “big box” stores in the US, as well as additionally closing “big box” stores abroad in the UK, Turkey, and China. The closure of its stores created fewer consumers and a decreasing number of units sold in the previous year, which disrupted revenue growth for the company. In the previous four years, Best Buy saw “17% value CAGR in its internet retailing operations, while store-based retailing has seen a value CAGR of just 6% […] despite this pace of growth internet sales account for only 5% of the company’s total sales value in 2011” (Passport). The remaining 95%, or the bulk of revenue for Best Buy, suffered as it closed down stores, which cut deeply into revenue. The company additionally lost revenue in depletion of its main consumers in the US market. The majority of Best Buy consumers are Americans, who account for 76% of the company’s revenue in 2011, however, by the end of 2011 the US market accounted for only an abysmal 14% of revenue (Passport). With the reduction of the US market, Best Buy faced a 62% loss in its core consumers in 2011. Together, through a reduction of
Bibliography: Best Buy Co, Inc. Best Buy Co, Inc. - Financial and Strategic Analysis Review. Rep. N.p.: Global Data, 03-Aug-2012. Web. Passport. "BEST BUY CO INC IN RETAILING." Euromonitor International, Apr. 2012. Web. Savitz, Eric, Forbes Staff. "Best Buy: Grasping At Straws." 29 Mar. 2012: n. pag. Print.