Best Buy goes on the offensive with new growth strategy

Dive Brief:

• 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^[1]. 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^[2]. 

• 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.

Dive Insight:

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.”