Best Buy, Inc.’s BBY turnaround story, owing to Hubert Jolly’s (the present executive chairman) Renew Blue strategy, is encouraging amid the e-commerce giant Amazon's AMZN dominance in the industry. Following the successful completion of the Renew Blue program, the company launched the “Best Buy 2020: Building the New Blue” strategy.
The new plan focuses on the expansion of multi-channel retail business, offering services and solutions to meet customer need. The company’s topmost priority is to explore and pursue growth opportunities, better performance in key areas, cost optimization, and investing for the improvement of its employees as well as systems. Further, the company targets $600 million of cost reduction by 2021.
Best Buy has been progressing well with the implementation of its latest strategy by offering smart home devices and expanding the Total Tech Support members to boost customers’ experience. In doing so, it hired in-store experts, who will help customers in selecting smart home products from Vivint and other partners along with offering professional installation and monitoring services.
Touted as one of its boldest moves, Best Buy expanded its In-Home Advisor program to core US markets. The program consists of advisors, who guide customers to find out the right technology solutions and provide free in-home consultations.
With the growing popularity of home fitness, the company decided to enter this space. It will now offer high-tech NordicTrack running machines, Flywheel bikes and Hydrow running machines. As of now, these products are available in six stores in California, Delaware and New Hampshire. By fiscal 2020, the company intends to expand these offerings to almost 100 stores.
This apart, Best Buy acquired GreatCall — a major connected health technology company — to offer unique solutions to aging customers. This deal will benefit Best Buy by providing a recurring revenue channel and ample growth opportunities in the United States. However, we believe that sustained investments in technology and supply chain may also keep the company’s margins under pressure in the short run.
Moreover, Best Buy has already made its presence felt in key product categories like 4K TV through partnerships with major vendors such as Sony, Samsung and LG. This move is in sync with its Best Buy 2020 strategy and it enables these vendors to set up stores in Best Buy locations, which in turn will help it improve the shopping experience for consumers. In fact, the company recently extended its partnership with Apple and will now provide repair services for iPhones and MacBooks at all Best Buy’s stores.
All said, this new strategy already started showing encouraging results. Notably, the company’s comparable sales grew 1.6% in first-quarter fiscal 2020, with online sales gaining 22.5%. Going forward, positive consumer sentiment, strong online sales, more opportunities in services and cost-containment efforts will continue to boost Best Buy’s profitability.
In fact, the company anticipates fiscal 2020 earnings of $5.45-$5.65 per share, suggesting growth from $5.32 reported in fiscal 2019. Management forecasts Enterprise revenues of $42.9-$43.9 billion. It reported Enterprise revenues of $42.9 billion in fiscal 2019.
Best Buy’s turnaround has managed to impress investors, which led this Zacks Rank #3 (Hold) stock to gain 40% in the past six months, outperforming the industry’s growth of 32.1%.
Some Better-Ranked Retail Stocks to Consider
Target Corp. TGT currently carries a Zacks Rank #2 (Buy). The company has a long-term growth rate of 7.1%. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
TJX Companies TJX has a long-term growth rate of 10.9% and a Zacks Rank #2 at present.
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