Best Buy Turnaround Plans Solidify With Windows Store

NEW YORK ( TheStreet) -- Best Buy's ( BBY) efforts to breathe new life into its stores appear to be gaining traction after the big box retailer unveiled a Windows Store partnership with Microsoft ( MSFT) that mirrors a similar concept it's already rolled out with Samsung.

On Thursday, Best Buy said it will create Windows stores within 500 of the company's U.S.-based outlets and another 100 in Canada, in a partnership with Microsoft that may help drive increasing consumer interest in products such as the Microsoft Surface, Windows Phone, Xbox and Microsoft's PC ecosystem.

Best Buy shares gained over 2% in Thursday trading and closed at $27.56.

For tech giants such as Microsoft, Samsung and even Apple ( AAPL), Best Buy store-in-store concepts increasingly appear a way to ensure new tablet, smartphone and PC products get the promotion they need with consumers.

Best Buy, the nation's top retailer, also sees a benefit from such store-in-store arrangements because it helps to bolster consumer experiences and the company's overall service, potentially helping to differentiate its brick-and-mortar outlets from online competition in Amazon ( AMZN) and discounters such as Wal-Mart ( WMT) and Costco ( COST).

The Windows store-within-a-store concept is similar to a partnership Best Buy unveiled with Samsung in April and which is all but complete, according to company spokesperson Jon Sandler.

Like Samsung stores, the Windows Store will contain a mix of Best Buy sales staff and specialists directly from Microsoft.

Windows Stores will have 1,200 Microsoft trained sales associates, according to a press release. Such specialization could be beneficial to both Microsoft in getting its Windows 8 operating system a critical mass, and in helping to revive some slumping businesses at Best Buy.

For instance, while tech critics have generally found Microsoft's Windows 8 operating system to be a compelling challenge to Apple's iOS and Google's Android, they have also lamented it is a confusing interface. Having trained specialists in Best Buy, the biggest point of contact between many hardware manufacturers and the consumer, could help to familiarize the software.

Such a scenario would play into the hands of Best Buy, which has suffered mightily from chronic declines in PC sales.

Tightening relationships with vendors, generally, seems to be Best Buy's most important strategic initiative as the company tries to boost profit margins and end a string of quarterly same-store sales declines.

Sandler, the Best Buy spokesperson, calls Samsung's store-in-a-store concept "tremendous" and says the Windows Store is similar in concept, even if it will have a different look and set of products. Both concepts are indicative of Best Buy's closer work with its vendor, according to Sandler.

Apple, Samsung, HP, Sony ( SNE) and LG are Best Buy's top five vendors, according to a recent analysis from Deutsche Bank analyst Mike Baker.

While Best Buy's earnings remain challenged in a tough environment for PC products and electronics sales generally, Wall Street analysts highlight concepts like the Samsung and Windows Store as the way forward for the Richfield, Minn.,-based company.

"These are the right moves, but they will take a little while to pay off. Once they do, the return could be quite lucrative," Michael Lasser, a UBS analyst, wrote of store-in-store concepts in a May 22 note to clients. On the other hand, he added, it was possible the gains might only be enough to "offset declines in other parts of the business."

Best Buy shares have have gained strongly in 2013 and they are now far higher than year-ago levels. Continued share gains, however, are likely predicated on Best Buy proving concepts such as its Samsung and Windows Store.

Strong results could create a groundswell among Best Buy's other vendors. They could also give the company's shareholders reason to believe a turnaround is taking hold, after a rough handful of years in the wake of the housing market collapse.

-- Written by Antoine Gara in New York

If you liked this article you might like

What to Watch From Samsung, Google and Others at the Mobile World Congress

What to Watch From Samsung, Google and Others at the Mobile World Congress

Warren Buffett Is Sticking to His Strengths By Selling IBM and Buying More Apple

Warren Buffett Is Sticking to His Strengths By Selling IBM and Buying More Apple

Buffett Letter to Shareholders May Detail How He Intends to Spend $109 Billion

Buffett Letter to Shareholders May Detail How He Intends to Spend $109 Billion

General Mills Buying a Natural Pet Food Company for $8 Billion Makes Sense

General Mills Buying a Natural Pet Food Company for $8 Billion Makes Sense

Apple's HomePod Is No Amazon Echo-Killer, But It Doesn't Need to Be

Apple's HomePod Is No Amazon Echo-Killer, But It Doesn't Need to Be