Best Buy sales have been falling so steadily (see third-quarter loss report here), it's not worth the money it would cost a buyout firm to attempt a takeover and reorganization, writes analyst Dan Wewer, in a report to clients of Raymond James & Associates.
"Best Buy finished (its) third quarter with just $309 million of cash, down from $2.1 billion a year ago," and writeoffs have cut shareholders' equity to $4.1 billion, down from $6.6 billion a year ago, he wrote, citing the chain's increased dependence on low-margin smartphones and appliances.
"We do not understand why Best Buy would be an attractive LBO candidate. The combination of significant comp sales declines, general margin (percentage) contraction, and intense competitive pressures is not a business model that can support the massive levels of debt required in an LBO." Picture could change after Christmas sales, but Wewer's not holding his breath.