By Erik Gruenwedel | Posted: 05 Jan 2009
egruenwedel@questex.com

Best Buy’s aggressive cost restructuring coupled with rival Circuit City’s bankruptcy has led to renewed confidence for the Minneapolis-based consumer electronics retail chain by one Wall Street analyst.

Matthew Fassler with Goldman Sachs upgraded shares of Best Buy to “buy” from “neutral,” believing the stock has 17% upside potential over the next 12 months.

Best Buy, since its last financial call when it reported a 77% drop in net income, has repeatedly waved a red flag regarding the imploding economy and its effect on consumer electronics retail. Last month the chain said it would offer nearly all of its 4,000 corporate employees a voluntary separation plan, which includes increased weeks of pay, health care and dental coverage.

The analyst lauded Best Buy’s aim to reduce capital expenditures 50% to help boost free cash flow (imperative in a credit-strapped economy) to $1 billion.

Fassler, in a research note, said Best Buy’s ability to achieve forecasts should yield positive results in a domestic economic he described as “daunting.”

The analyst forecasts Best Buy to post a 20% decline to $250 million from $299 million for DVD and Blu-ray players in fiscal 2009. He projects a 10% decline in DVD and Blu-ray movie sales to $1.74 billion from $1.85 billion last year.

Best Buy reports December sales Jan. 9.

 

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