Ahead of its annual investor day Wednesday morning, Best Buy released its financial goals for fiscal 2025, including enterprise revenue of $50 billion, (surpassing the fiscal 2020 guidance of $43.1 billion to $43.6 billion) and an operating income rate of 5%, (beyond both the current fiscal 2020 guidance of flat to slightly up and fiscal 2019's 4.6%).
Along with focus on topline growth, the company is targeting $1 billion of additional cost reductions and efficiencies "that help fund these investments and offset potential pressures," according to a company press release.
Key growth initiatives include Best Buy Health and an ongoing supply chain transformation, the company said.
Best Buy CEO Corie Barry, who was promoted to the top spot in April, said in a statement that the next phase of the company's strategy is dubbed "Building the New Blue: Chapter Two," and characterized it as harnessing its existing momentum.
"We are excited about what we have accomplished so far, and we believe we will continue to enrich our customers' lives through technology and unlock profitable growth as we execute on the next chapter of this strategy," she said.
It's not a bad approach, considering the retailer's comeback story, crawling back from the Great Recession at the same time it battled Amazon's incursion into its consumer electronics turf. "Building" continues to be a theme: Two years ago, under a different chief executive, Hubert Joly, the company unveiled "Best Buy 2020: Building the New Blue," which outlined a pivot from defense to growth.
While the company has held its own in consumer electronics — thanks to high-touch customer service in and out of the store, and assertive price-matching — it's also expanding beyond that segment. Notably, healthcare is emerging as key to that and will likely be a major topic during the meeting. A year ago Best Buy acquired GreatCall, which offers connected health and emergency response services to the elderly; last month, the company credited that business as contributing meaningfully to its 2.1% second quarter domestic revenue rise to $8.8 billion.
Since then, it's added Critical Signal Technologies and BioSensics to its roster. Plus the company is carving out space in 100 stores to sell "connected fitness" equipment like Flywheel cycles and Hydrow rowing machines. Telsey Advisory Group analysts said they expect "this space to be added to other stores over the next few years and the contribution to growth should ramp over time," and noted that "Best Buy should be able to leverage its footprint and technology offering to serve the health & wellness segment."
Moody's Investors Service lead by Best Buy analyst Charlie O'Shea in emailed comments on Wednesday hailed the company's "sensible extension strategy into segments such as health care." More broadly, the company's goals "seem very attainable, and are consistent with our long-standing view that Best Buy will continue as one of the top performers in US retail," he also said.
Investors will likely want to hear more about how tariffs might affect the retailer's goals. This year, its exposure to tariffs is "modest," according to a Telsey note emailed to Retail Dive. The worry is less over levies on electronics per se and more to do with their effect on consumer spending, Telsey analysts said. "[R]ecall that the company took a more conservative view of the economy when it reported 2Q19 earnings, as it expects consumers to be negatively impacted by higher prices across retail related to tariffs."