by J.T. Nowen

Created on: March 03, 2009   Last Updated: March 10, 2009

Before purchasing Best Buy, there are several questions a savvy investor should ask: Has the company grown too quickly for this current economic climate? Has growth directly increased profits or simply increased debt? What will happen as current management ages out? How will local economies affect the company's future? Was Circuit City significant enough that its closing will dramatically impact Best Buy?

Determining the answers requires a critical reading.

About the Company
Founded in 1966 in St. Paul, Minnesota, Best Buy (BBY) is a consumer electronic retailer that operates in the US, Canada and China with forthcoming plans to expand into Mexico and Europe. Best Buy has a strong history of growth, acquiring at least eight companies since 2000 including: Magnolia Audio Video, Future Shop, Geek Squad, Audiovisions, Pacific Sales, Jiangsu Five Star Appliances, Musicland and Speakeasy Inc. As of 2008, there are 923 stores in the United States, opening 101 stores during 2008 and 80 stores during 2007. Over a quarter of stores are located in California, Illinois, Texas and Florida.

Statistics and Fundamentals
As of November 2008, Best Buy had $12.3B in hard assets, $8.3B in soft assets and $16.1B in liabilities with 413.43M shares outstanding. Capital IQ lists the stock's book value at $11.03. Employing 150k people, Best Buy's net income in 2008 was $1.4B (vs. $1.4B in 2007 and $1.1B in 2006). The company's stock carries a dividend of $0.56; Best Buy has paid quarterly dividends since 2004. Over the last three months, average daily volume has been just over 9 million shares traded per day. Currently, Best Buy has lost 42% off of its 52-week high, but gained 63% off of its 52-week low. Relative to the S&P 500, Best Buy has grown over the long term, but its performance during the last year has dipped below this index, particularly from October through December.

Company Leadership and Insider Trading
The Chairman of Best Buy is its founder, sixty-nine year old Richard M. Schulze. He served as CEO from 1966-2002. As of March 2008, he held 2.2 million shares. His annual compensation is $1M with an additional $11K in options. CEO of Best Buy is Bradbury Anderson, 60. Anderson's yearly pay is $1.2 million with $2.4 million in exercised options. Anderson holds 1.6 million shares. In June of 2009, Brian Dunn, 48, will take over as CEO. Employed by Best Buy since 1985, Dunn is not listed as an inside holder of stock. Forbes listed his 2008 salary at $774K with $3.1 million in other compensation. Altogether, insiders own 17% of the company while institutions own 75%. Insiders have traded 1.8 million shares in the last six monthsnine purchases and one sale.

Competitors
In terms of market share Best Buy($11.09B) towers over the now defunct Circuit City, CCTYQ.PK ($1.01M). Best Buy is the leader in sales of consumer electronics. Circuit City was the third largest US seller of consumer electronics, following retailing giant Walmart (WMT). Lessor competitors include Dell (DELL), RadioShack (RSH)and Target (TGT).

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