10% Best Buy Upside from Higher Revenue per Square Foot
The revenue per square foot for Best Buy (NYSE:BBY) stores in the US has declined from an estimated $953 in 2006 to $905 in 2008, [1] partially driven by comparable store sales decline in 2008 and lower-than-average performance of new stores opened each year. Despite this, we expect revenue per square foot to pick up going forward and Trefis member forecasts for revenue per square foot suggest even more upside.
Best Buy competes with other major retailers like Wal-Mart (NYSE:WMT), Costco (NASDAQ:COST) and Radioshack (NYSE:RSH). We currently have a Trefis price estimate of $41 for Best Buy’s stock, in line with the current market price of $42.
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Television sales accounts for a major portion of Best Buy’s revenues. An increase in units sold is expected to offset declining average selling prices of TVs, thereby boosting revenues. Best Buy has been broadening its products and services with more mobile phone offerings, web services as well as new Logitech and Sony devices associated with Google TV. However, a weak macroeconomic environment and increasing consumer electronics sales by discount retailers like Wal-Mart and Costco can pose potential threats to Best Buy’s revenues.
The average of Trefis member forecasts for Revenue per Square Foot for Best Buy US indicate an increase from around $912 in 2010 to $1,233 by 2016, compared to the baseline Trefis estimate of an increase from $913 in 2010 to $1,059 by the end of the Trefis forecast period. The member estimates imply an upside of 10% to the Trefis price estimate for Best Buy’s stock.
You can drag the forecast trend-line above to express your own view, and see the sensitivity of Best Buy’s stock to Revenue per Square Foot for Best Buy US.
Our complete analysis for Best Buy’s stock is here.
Notes:
1. Average Revenue per Square Feet for Best Buy US Stores is calculated as: (Total number of stores) x (Revenue per store)/(Total square footage). Best Buy reports Total Number of Stores, Revenue per Store, and Total Square Footage in its annual SEC filings.