Retail has always been a difficult business. But it has become even more challenging lately, due to the e-commerce boom.
Amazon.com (AMZN) and other Internet retailers are a dangerous threat to most brick-and-mortar retailers.
Consumers are clearly loving the convenience of at-home delivery. And, Amazon.com can often lower prices than can be found at many physical stores.
This has put intense pressure on the retail industry. Many retailers have responded by closing stores.
However, Best Buy (BBY) has bucked the overall trend of retail weakness, that is spreading across the industry.
Best Buy performed well in 2016, and recently rewarded shareholders with a hefty 21% dividend hike.
It is a Dividend Achiever, a group of 271 stocks with 10+ years of consecutive dividend increases.
You can see the full Dividend Achievers List here.
Best Buy has proven that there is a way for brick-and-mortar retailers to compete with Amazon…
This article will discuss how Best Buy learned to adapt, in a changing retail environment.
Business Overview
It wasn’t too long ago that Best Buy was left for dead, because it seemed to be directly in Amazon’s cross-hairs.
At the end of 2009, Best Buy was a $40 stock. By the end of 2012, it was trading for just $11.
Investors were convinced that Best Buy was on a similar path as so many electronics retailers, like RadioShack and Circuit City.
Comparable store sales, a very important metric that shows performance at stores open at least one year, fell 2.6% in fiscal 2013 (calendar year 2012).
Source: 2016 Annual Shareholder Letter, page 5
This decline mirrors what many other retailers are seeing right now.
But Best Buy quickly returned to growth, and the stock is back to $44.
It has engineered a remarkable turnaround. Last year, comparable store sales rose 0.9%, the highest growth level in the past six years.
The first thing Best Buy did to restore its growth was to build up its e-commerce platform.
