Best Buy Hones the Edge

"Most people think Customer Centricity is a positive for the company, but any time you go through this kind of change there is a potential for a bump," Weinhart says. "This is the year they are really making an aggressive push in rolling it out, so if there is going to be a year where we see a hiccup in the process, this is probably the year where you would expect it."

Weinhart will be listening closely on next week's conference call for any details about the progress of the rollout. Despite the risks involved, the program, which alters the company's selling floors in stores to accommodate a wider variety of customers, should be a benefit in the long run, judging from its history of Best Buy's execution. Meanwhile, Widlitz predicts that consumer electronics will shift back into high gear in the second half of 2005 as customers start flocking for lower-priced digital televisions.

"Investors thought last year was the year of the digital television, but I actually think the second half of this year is really going to see units ramp as prices come down," Widlitz says. "Some people are concerned about margins, but the more prices come down, the more customers these companies will have. I think this is where these two stories will play out."

In addition to digital televisions, Microsoft (MSFT Quote) previewed its Xbox 360 on MTV on May 12. When Xbox launched in 2001, Best Buy saw a 300-basis-point sequential increase in comps, and Rifkin says another such boost could be in the cards.

"While it is still about six months until the Xbox 360 hits the shelves in November, we believe the introduction of next-generation gaming consoles could benefit consumer electronics retailers this holiday season and through 2006," wrote Rifkin in a recent research note. Lehman regularly trades shares of Best Buy, and the firm has a noninvestment banking business relationship with the company.

If these product cycles arrive while consumer spending is still healthy, both these retailers should benefit. But if they had to choose between them, most analysts would go with Best Buy.