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Greenberg: Is New Innovation Really Best Buy's Problem?

By: Herb Greenberg | 05/22/14 - 11:28 AM EDT

SAN DIEGO (TheStreet) -- A few weeks ago I went to a local Best Buy (BBY) to buy a cable modem. It was a Thursday night at about 7, and there were more salespeople in the large, well-lit store than customers.

As has been the case in recent visits, it was friendly, clean and the salespeople seemed to know the products. Or if they didn't, they did a good job pretending they did.

Once I chose the product, I headed to the cash register. But before I got there I whipped out my phone, pulled up Amazon (AMZN) and found the same product for about $20 less. I showed it to the cashier. He called over a manager to get approval. Done.

Then I asked the question that gave me the surprising answer: How many people price match? "Five out of 20," said the cashier.

I was stunned. I would've thought it was more like 20 out of 20. It's such a no-brainer. But that's not the point. The point is, rather than showrooming, I bought it there.

(Confession -- and maybe it's my age: I Like to go to Best Buy and chat up the salespeople as part of my product research. I love to get the pitch, and then go into 20-questions mode. And if the price is the same, I prefer to get it now.)

Price-matching, no doubt, didn't help margins. But that may be the least of Best Buy's concerns. More troubling, I thought, were CFO Sharon McCollam's candid comments in the earnings release, notably:

"As we look forward to the second and third quarters, we are expecting to see ongoing industry-wide sales declines in many of the consumer electronics categories in which we compete. We are also expecting ongoing softness in the mobile phone category as consumers eagerly await highly-anticipated new product launches. Consequently, absent any major product launches, we are expecting comparable sales to be negative in the low-single digits in both the second and third quarters."

And therein lies the story: I think we're at that point where it isn't about new product launches; we're at the point where everybody is all in on mobile and many other products. Everything, from this point on, will be incremental and replacement.

So, for example, after an initial pop by the gotta-have crowd for the iPhone 6, will the average consumer (key word, "average,") wait until their contracts are up to buy? Will new HDTVs really spark a sales rush?

My guess: No, certainly not any more than 3-D TVs did.

As Rob Wilson of Tiburon Research noted on Twitter this morning, "I've listened to many consumer electronics conf calls over 13+ yrs. 'Hoping for innovation' has never worked well for investors." For the most part, barring something everybody has to have, like smartphones and flat-screen TVs, much of consumer electronics now appears to be replacement.

Reality: CEO Hubert Joly gets high marks for attempting to not just stabilize but revitalize the company while keeping stores fresh and motivating the sales force. And...getting me back as an in-store customer.

But even Joly realizes the big box concept's days may be numbered. On the earnings call, he said the company "will continue to optimize our store footprint. We know that in the short-term our stores are contributing positively and are great assets. But over time, we'll see how all of this evolves....but this is something that will take place over multiple years..."

Investors, based on today's bounce in shares, even after dubious guidance, are willing to cut him more slack. They clearly like Joly, and for good reason.

But careful about reading too much into a one-day bounce. While Best Buy's shares may be up to $26, they were $44 in November. Of course, they were also $11 a year earlier. Your move.

-- Written by Herb Greenberg in San Diego

Follow @herbgreenberg

Herb Greenberg, editor of Herb Greenberg's Reality Check, is a contributor to CNBC. He does not own shares, short or trade shares in an individual corporate security. He can be reached at herbonthestreet@thestreet.com.

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