Monday, December 10, 2007

CompUSA: Bad News for Best Buy and Circuit City

It is one thing to have competition no one goes to, it is another to have people then rush to it when they give things away. This may put a dent in both Best Buy (BBY) and Circuit City's (CC) holidays.

In announcing the closing, CompUSA announced it will be offering "attractive bargains on computer and electronic products as part of store closing sales and its 103 retail stores will remain open through the holidays.

Earlier this year they closed over half of their U.S. retail stores in a bid to streamline operations and bolster margins at top-performing stores. Guess it did not work.

Long term this will benefit all electronics retailers like the one mentioned about and even Wal-Mart (WMT) and Sears Holdings (SHLD), for this holiday season though, it is not good news.

In order to rid itself of inventory, undoubtedly CompUSA will be selling merchandise below cost. It is a move unlikely to be replicated by other retailers and this will affect sales during the next 4 weeks in the 103 markets that have the CompUSA locations.

Will it break the holiday season for other retailers? No. It does have the definite possibility of making a good one average or an average one poor though. If anything good comes of we may get a pullback in one of the names as folks over react to the news and get a nice entry price for shares (except Circuit City).

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