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Best Buy's Not Dead But It's Far From Thriving

Stocks in this article: BBY AMZN WMT AAPL

The level of improvement needed to turn these figures around is going to take longer than investors expect. The question is how much more time investors are willing to spend.

More important -- is it worth sacrificing 150% worth of gains?

I don't want to make this sound as if it was all bad news. For instance, Best Buy showed meaningful progress in its online business, which grew 16% in the U.S. This is a pretty significant jump as the company tries to catch Amazon's online dominance. Plus, the company deserves plenty of credit for showing a new commitment to the customer experience. I didn't believe that still mattered.

Here again, out of frustration I had given the company no credit whatsoever for this idea when, at Best Buy's analyst day last year, management made indistinct mentions about "reinvigorating the customer experience." Nobody really knew what that meant. Today, however, this initiative seems to be paying off handsomely.

Along similar lines, management's new approach towards raising the liveliness of its showrooms while showcasing the brands that appeals the most to its customers seems to be making a difference. These and other merchandising strategies helped the company advance profitability, although there's still plenty of room for improvement as well as operational deficits that Best Buy management needs to fix

The Street seems encouraged that the company is on the right path. Plus it does appear as if customers are responding well to Best Buy's "price match" guarantees. To the extent the Samsung partnership can help boost against Wal-Mart, Best Buy may benefit from some incremental traffic. But I'm not expecting this will completely erase the disadvantage against Amazon's online presence.

In that regard, these initiatives, while improved, have failed to boost comps to the level that management expected. But if not now, when?

Accordingly, I believe the best way to play Best Buy is for investors to take more of a cautiously optimism approach, especially with the gigantic leap that the stock has already experienced. Should the stock fall 20% to, say, $22 per share, then that's an entirely different discussion.

For now, it's best to lock in your profits and not look back.

At the time of publication the author had a position in any AAPL.

This article was written by an independent contributor, separate from TheStreet's regular news coverage.

Richard Saintvilus is a private investor with an information technology and engineering background and the founder and producer of the investor Web site Saint's Sense. He has been investing and trading for over 15 years. He employs conservative strategies in assessing equities and appraising value while minimizing downside risk. His decisions are based in part on management, growth prospects, return on equity and price-to-earnings as well as macroeconomic factors. He is an investor who seeks opportunities whether on the long or short side and believes in changing positions as information changes.
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