Things Could Get Even Worse For Best Buy

Ashley Lutz

Jan 16, 2014, 20:31 IST

Best Buy shares are collapsing after the company reported abysmal holiday sales results.

The disaster is surprising to many because Best Buy's turnaround had been lauded by Wall Street analysts for the past year.

CEO Hubert Joly presented an impressive strategy that included improving customer service, lowering prices on key items like televisions, and offering a wider variety of assortments.

While this plan won the approval of the investment community, it's not enough to translate to real profits for Best Buy, said Brian Sozzi, chief equities strategist at Belus Capital Advisors.

That's because consumers just aren't buying many of the categories that Best Buy sells, Sozzi says.

"Not enough products are winning yet to overcome weakness in the downtrending categories such as digital imaging, movies, etc.," he writes.

It's also concerning that Best Buy blamed "supply constraints" for the downturn because the chain needs to provide compelling new product to get customers in stores, Sozzi said.

Best Buy's current products don't interest customers, and it can't secure the new products they do want.

That means things could get even worse soon.

"Expect a sizable store closure program announcement by Best Buy when it reports its full earnings," Sozzi said.