Best Buy's investors may be about to get a mini financial flashback to when long-time rival Circuit City went bust back in 2009 from the sudden closure of regional electronics store chain Fry's Electronics Wednesday.
"When all is said and done, we believe the total dollar share clinched by Best Buy (BBY) could be in excess of $400 million," estimated Jefferies analyst Jonathan Matuszewski of the lift to Best Buy's sales from Fry's departure. "Higher level, while this is not a needle mover for Best Buy's base of ~$47 billion in sales, we view it as emblematic of an increasingly attractive landscape for competitors with staying power."
Matuszewski — who estimated Fry's had nearly $2 billion in annual sales — arrived at his projection by looking at where Best Buy's stores overlap with Fry's. It's an analytical exercise most analysts on Wall Street did when Circuit City liquidated from the market. Since then, Best Buy has gone on to become the dominant pure-play electronics store in America as former Circuit City customers simply navigated to Best Buy.
Founded some 36 years ago, the privately held Fry's Electronics had 31 stores spanning nine states. It was known for its zany exterior store designs and merchandise heavily skewed to tech geeks. But similar to many others in retail, the impact of the COVID-19 pandemic and structural shift to online shopping appear to have finally caught up to Fry's.
"Our overlap analysis points to 55 Best Buy stores within a 15-minute drive of Fry's fleet of 32 stores across Arizona, California, Georgia, Illinois, Indiana, Nevada, Oregon, Texas, and Washington. More specifically, we estimate an average of 2 Best Buy stores within a 15-minute drive of Fry's locations, with >20% of markets having 3-4 BBY units in close proximity," Matuszewski said.
Fry's said in a statement: "After nearly 36 years in business as the one-stop-shop and online resource for high-tech professionals across nine states and 31 stores, Fry’s Electronics, Inc. (“Fry’s” or “Company”), has made the difficult decision to shut down its operations and close its business permanently as a result of changes in the retail industry and the challenges posed by the COVID-19 pandemic. The Company will implement the shut down through an orderly wind down process that it believes will be in the best interests of the Company, its creditors, and other stakeholders."
The company added, "The Company ceased regular operations and began the wind-down process on February 24, 2021. It is hoped that undertaking the wind-down through this orderly process will reduce costs, avoid additional liabilities, minimize the impact on our customers, vendors, landlords and associates, and maximize the value of the Company’s assets for its creditors and other stakeholders."
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