At their investors day conference on Tuesday, Best Buy executives — including CEO Hubert Joly — outlined their strategy to advance the electronics retailer from a defensive stance to a growth strategy, dubbed "Best Buy 2020: Building the New Blue," according to a press release. In its investor day materials, the company said it believes it’s operating in an "opportunity-rich environment," and that its new approach "is designed to take advantage of key growth opportunities by expanding what the company sells and evolving how it sells."
Renew Blue, a more defensive strategy launched in 2012, focused on cost cuts, store closures, merchandise changes and improved customer service — a strategy that halted sales and earnings declines, according to the release. The company also instituted a price-matching policy last summer to ward off Amazon’s encroachment in electronics sales.
For fiscal 2021, the company now expects fiscal enterprise revenue of $43 billion versus $39.4 billion in fiscal 2017 (the last year of the company’s Renew Blue transformation), non-GAAP operating income of $1.9 billion to $2 billion versus $1.7 billion in fiscal 2017, non-GAAP diluted earnings of $4.75 to $5 per share, and an 8% to 9% compound annual growth rate from fiscal 2017, the company said. Shares fell on the outlook and were down 8% on Wednesday.
Best Buy has managed to hold its own against Amazon. In fact, in a note about its most recent quarter emailed to Retail Dive, GlobalData Retail Managing Director Neil Saunders said the electronics retailer is doing better than that. "The 4.9% increase in domestic sales underlines that the company is more than holding its own in the electricals market and should put pay to the oft repeated fiction that retailers of its ilk will struggle to survive in the era of Amazon," he said.
Best Buy's second quarter was impressive on multiple fronts, Moody’s Lead Retail Analyst Charlie O’Shea said in a note emailed to Retail Dive last month. "Gross margin held steady with 2016, which we believe is particularly meaningful given the impact of Amazon’s Prime Day, which creates a heightened promotional environment throughout retail both before and after, especially for retailers involved in the consumer electronics segment."
O’Shea also said the favorable trends were likely to continue for the rest of the year and that overall momentum would continue to build. That was Joly’s focus this week, too. "Our Renew Blue transformation was about improving the customer experience and fixing what was broken," he said in a statement. "Building on what we have accomplished, we are excited by the opportunities we have in this next chapter to grow the company by helping customers pursue their passions and enrich their lives with the help of technology, which is a much bigger idea and one that is rich with opportunities."
The retailer is already doing many of the right things, including offering newer technologies like smart home devices, says Saunders, which will allow the retailer to engage and inform new consumers. There are many underlying reasons for Best Buy's success, he also said, including superior in-store customer service, which gives online buyers confidence when it comes to support and returns. The classic advantage of brick and mortar — the ability to see and try merchandise — is proving to be critical, he said. "Here, Best Buy's stores are a valuable asset and this should allow it to withstand the recent decision of Sears to sell some appliance brands via Amazon."
Best Buy executives described an even more proactive strategy going forward, which includes building a leading position in the smart home market through an expanded, well curated assortment, demonstrating new technology in a meaningful way and entering the solutions and services part of the market, they said. Its sales focus will be not just on selling products but also on "solving customers’ underlying needs," according to the company press release. Growth will be stoked by continuing to improve the customer experience within and across channels, the company said, as well as by more effectively addressing customer needs in underpenetrated categories and building its in-home channel.
To that end, Best Buy will enhance the smart home areas in all of its stores, roll out its "Best Buy Smart Home Powered by Vivint" home automation and security offering to 450 stores and add 1,500 dedicated smart home employees by the end of October.
The retailer is also piloting a service called "Assured Living," which uses technology to help adult children remotely check in on the health and safety of their aging parents. The company is also launching a new Geek Squad, "Total Tech Support," nationwide in Canada and at 200 stores in 10 U.S. cities, providing ongoing support for a customer’s tech, no matter where or when they bought it.