Homepage / Technology / Best Buy CEO: We've fixed what was broken, now we are focused on growth
Amazon says this Prime Day was its biggest shopping event ever Kudlow says President Trump is 'so dissatisfied' with China trade talks that he is keeping the pressure on As stocks regain their footing, an ominous warning looms Goldman Sachs downgrades Clorox to sell, says valuation is 'unsustainably high' How Satya Nadella has spurred a tripling of Microsoft's stock price in just over four years Kudlow says economic growth could top 4% for 'a quarter or two,' more tax cuts could be coming The one chart that explains Netflix’s stunning comeback US housing starts plunge 12% in June to a nine-month low Aerospace titans Boeing and Airbus top $110 billion in orders at Farnborough Target uses Prime Day to its advantage, logging its 'biggest online shopping day' so far this year Billionaire Marc Lasry sees bitcoin reaching up to $40,000 as it becomes more mainstream and easier to trade These are the 10 US airports where you're most likely to be hacked Amazon shares slightly higher as investors await Prime Day results Wreck of Russian warship found, believed to hold gold worth $130 billion A bullish ‘phenomenon’ in bond market is weeks away from fading, top credit strategist says Stocks making the biggest moves premarket: MS, GOOGL, TXN, UAL, NFLX & more Twitter shares up 50% since late April means most upside priced in, analyst says in downgrade EU fines Google $5 billion over Android antitrust abuse Mortgage applications fall 2.5% as buyers struggle to find affordable homes America may not have the tools to counter the next financial crisis, warn Bernanke, Geithner and Paulson Investors are getting spooked as the risk of a no-deal Brexit rises EU expected to fine Google $5 billion over Android antitrust abuse Ex-FBI chief James Comey urges Americans to vote for Democrats in midterm elections Elon Musk apologizes to British cave diver following baseless 'pedo guy' claim Disney, Comcast and Fox: All you need to know about one of the biggest media battles ever Xiaomi shares notch new high after Hong Kong, mainland China stock exchanges reach agreement The trade war is complicating China's efforts to fix its economy European markets set for a strong open amid earnings; Google in focus Hedge fund billionaire Einhorn places sixth in major poker tournament The biggest spender of political ads on Facebook? President Trump Asian stocks poised to gain after Fed's Powell gives upbeat comments; dollar firmer Stocks are setting up to break to new highs Not all FAANG stocks are created equal EU ruling may be too little, too late to stop Google's mobile dominance Cramer explains how Netflix's stock managed to taper its drop after disappointing on earnings Airbnb condemns New York City's 'bellhop politics,' threatens legal retaliation Amazon sellers say they were unfairly suspended right before Prime Day, and now have two bad choices Investor explains why 'duller' tech stocks can have better returns than 'high-flying' tech names Elon Musk is 'thin-skinned and short-tempered,' says tech VC Texas Instruments CEO Brian Crutcher resigns for violating code of conduct Google Cloud Platform fixes issues that took down Spotify, Snapchat and other popular sites Uber exec: We want to become the 'one stop' transportation app 'What a dumb hearing,' says Democrat as Congress grills tech companies on conservative bias Amazon shares rebound, report says Prime Day sales jumped 89 percent in first 12 hours of the event How to put your medical history on your iPhone in less than 5 minutes Investment chief: Watch these two big events in 2018 Even with Netflix slowing, the market rally is likely not over Cramer: Netflix subscriber weakness debunks the 'sky's the limit' theory on the stock Netflix is looking at watch time as a new area of growth, but the competition is stiff Why Nobel laureate Richard Thaler follows Warren Buffett's advice to avoid bitcoin Rolls-Royce is developing tiny 'cockroach' robots to crawl in and fix airplane engines After Netflix plunge, Wall Street analysts forecast just tame returns ahead for the once high-flying FANG group Roku shares rise after analyst raises streaming video company's price target due to customer growth China is investing 9 times more into Europe than into North America, report reveals Amazon says US Prime Day sales 'so far bigger than ever' as glitch is resolved Netflix is on pace for its worst day in two years US lumber producers see huge opportunity, rush to expand San Francisco to consider tax on companies to help homeless Homebuilder sentiment, still high, stalls as tariffs, labor and land drive up costs Powell backs more rate hikes as economy growing 'considerably stronger' Netflix history is filled with big stock declines – like today – followed by bigger rebounds Intel shares get downgraded by Evercore ISI due to rising competition from Nvidia, AMD Petco aims to reinvent the pet store with something you can't buy online Genetic testing is coming of age, but for consumers it's buyer beware Tech 'FAANG' was the most-crowded trade in the world heading into the Netflix implosion, survey shows Netflix weak subscriber growth may indicate a 'maturity wall' that could whack the stock even more: Analyst This chart may be predicting the bull market's demise Wall Street says Netflix's stock plunge is a ‘compelling’ buying opportunity because the streaming giant ‘never misses twice’ Tesla sinks after Musk tweets, again Boeing announces new division devoted to flying taxis Stocks making the biggest move premarket: NFLX, UNH, GS, AMZN, WMT & more Deutsche Bank downgrades Netflix, but says big subscriber miss is not 'thesis changing' IBM is experimenting with a cryptocurrency that’s pegged to the US dollar North Korea and Zimbabwe: A friendship explained Virgin Galactic spinoff Orbit to launch rockets from the UK with space deal Artificial intelligence will create more jobs than it destroys? That’s what PwC says ‘Treasonous’ Trump and ‘Putin’s poodle:' Scathing headlines follow the Trump-Putin summit China’s fintech companies offer ‘enormous’ opportunity, investment manager says Trump's performance at summit with Putin was 'unprecedented,' experts say Walmart and Microsoft link up on cloud technology as they both battle Amazon European stocks seen mixed amid earnings; Fed’s Powell to address Congress How I knew I should quit my day job and run my start-up full-time: Viral website founder China's stocks have been trounced, but the trade war may ultimately be good news for those shares Billionaire tech investor Peter Thiel bets on crypto start-up Block.one Asian shares subdued open after mixed close on Wall Street; energy stocks under pressure Amazon cloud hits snags after Amazon Prime Day downtime Netflix isn't doomed by one quarter unless people start questioning the long-term investor thesis Tech stocks set to sink on Tuesday after rough evening for ‘FANG’ Netflix plummets after missing big on subscriber growth This wristband lets humans control machines with their minds The U.S. has a rocky history convincing Russia to extradite computer criminals Amazon suffers glitches at the start of Prime Day Jeff Bezos is now the richest man in modern history 'The United States has been foolish': Read Trump and Putin's full exchange Goldman Sachs recommends these 5 highly profitable companies — including Nvidia — to combat rising inflation Goldman Sachs releases 'tactical' stock picks for this earnings season Three red flags for Netflix ahead of its earnings report The bond market may be raising recession fears, but don't expect one anytime soon Cramer: Banks are 'making fortunes' but are still as hated as they were during the financial crisis Putin told Trump at summit: Russia never meddled in US election

Technology

Best Buy CEO: We've fixed what was broken, now we are focused on growth

It’s been five years since Best Buy held an investor meeting. And while much has changed since the last one, there will still be skeptics in the audience at its Richfield, Minnesota, headquarters.

At its last one, in November 2012 in New York, then-new chief executive Hubert Joly laid out his transformation plan “Renew Blue” to reverse sales declines and improve profitability through cost cuts and growing online sales.

Best Buy did just that.

“Five years ago the times were different. We had negative comps. Our margins were going down. There were questions about whether we were going to survive,” Joly acknowledged in an exclusive CNBC interview.

Earlier this year, Joly concluded the transformation was complete.

“We’ve had four years of positive comps. Our margins have expanded. We have been, in the last five years, in the top 10 percent of the S&P 500 from a total shareholder return standpoint. Customer satisfaction is up. We’re gaining share,” he said.

“We’ve become relevant again,” Joly said, smiling. “And I couldn’t be more proud of what our associates have accomplished.”

Speaking to CNBC ahead of the meeting, he outlined areas where he sees potential growth, such as in the connected home market and with smartphones. He said the transformation strategy was mainly about “fixing what was broken.” The new strategy, Best Buy 2020, pivots and is “focused on growth.

Tuesday morning Best Buy released new financial targets for fiscal 2021 that it will discuss in detail at the meeting, as it outlines its plans for the next phase of growth.

Revenue is expected to grow to $43 billion in fiscal 2021, versus $39.4 billion in fiscal 2017. Meanwhile, the company will look to realize $600 million in annual cost savings by the end of fiscal 2021.

As a result, Best Buy estimates its adjusted operating income in fiscal 2021 will be between $1.9 billion to $2.0 billion versus $1.7 billion in fiscal 2017. On an adjusted basis, its earnings are projected to be in the range of $4.75 to $5.00 a share, which is an 8 to 9 percent compound annual growth rate from fiscal 2017.

After releasing these goals, Best Buy shares inched up less than 1 percent in premarket trading.

“We’ve taken the time to look at the strategic landscape. And we think that we are operating in a very attractive environment that’s full of growth opportunities,” Joly said.

Still, Best Buy will have to sell this strategy to investors. But that’s nothing new, five years ago, some had doubted whether Joly was right for the job. While he had turnaround experience, he had spent the last eight years in the hospitality industry and was leaving his position as CEO of hotel group Carlson to lead a U.S. consumer electronics retailer.

“We were consistently skeptical of Mr. Joly’s lack of retail experience,” Wedbush analyst Michael Pachter said in a note to investors. However, he added, “the company has executed nearly flawlessly since CEO Hubert Joly joined five years ago.”

Still, Pachter has an underperform rating on Best Buy shares because he wonders if it can sustain its growth as a price war rages between retail behemoths Amazon and Wal-Mart.

The connected smart home might be the most comprehensive category for the retailer to find opportunity under the new strategy for both service and product sales.

According to various estimates, the global smart home market is expected to grow to $33 billion to $50 billion over the next four years. Piper Jaffray analyst Peter Keith estimates Best Buy could capture 10 percent market share in the connected smart home sector, which would add more than a full percentage point of same-store sales growth through 2021.

A big initiative to capture that share is Best Buy’s new In-Home Advisor program. After testing the program for more than a year in a handful of cities, it’s currently rolling it out nationwide with a workforce of 300.

This program differs from Best Buy’s Geek Squad because it’s a free service. Best Buy employees with deep knowledge across product categories and brands go to customers’ homes and provide technology advice and guidance on anything from increasing appliance efficiency to improving Wi-Fi connectivity to setting up home assistants that speak to the sound system and thermostat.

While the program is in its infancy, the In-Home Advisors are already individually profitable. Joly says what’s even better is the potential for long-term relationships with consumers.

“Economically for us it’s attractive because it helps make customers happy, build a relationship and grow the revenue line,” he said. The margins are also better as the In-Home Advisors “unlock unmet needs” consumers don’t realize they have until someone can assess their homes, Joly said.

By the end of October, 450 Best Buy stores will have a smart home powered by Vivint section, and 1,500 smart home employees will join the team.

Additionally Tuesday, Best Buy announced it’s testing a service it calls Assured Living in Minneapolis and Denver, which uses technology to help loved ones check in on the safety and well-being of aging family members.

Joly used an example of a woman he calls an alpha mom, who does everything for everyone, to explain how Assured Living might help her keep tabs on her aging parents. “There’s a sensor under the bed or in the medicine cabinet with an app and artificial intelligence, she’ll be able to be alerted if something is wrong.”

But Best Buy is counting on millennials for the biggest opportunity when it comes to the connected home. The retailer’s market share with millennials is higher than any other demographic.

“[Millennials] are finally leaving their parents’ home and so they’re actually moving to the suburbs. And so they need to equip their home,” Joly said.

Millennials, along with most other demographics, count on their smartphones for more and more in their daily lives. But Best Buy has a relatively low market share in mobile. Part of Best Buy 2020 aims to change that.

“Buying a phone can be daunting. It’s a very expensive purchase. You have many choices you need to make,” Joly said. “We have a number of initiatives and improvements to the shopping experience, making it easier for customers to find out what plan they should buy, making it more efficient to get the phone.”

Joly declined to comment on his expectations for the new Apple iPhones and anticipated Android smartphone releases this fall.

For years, the narrative surrounding Best Buy and Amazon was that the consumer electronics retailer was becoming merely a showroom for shoppers that ultimately bought on Amazon. This summer when news surfaced that Amazon was building its own Geek Squad-like service, Best Buy shares took a hit.

But Joly has shown Best Buy can exist in an Amazon world, and in some cases, the two work together.

Best Buy is rolling out new Amazon Alexa and Google Home assistant experiences to 700 stores. Best Buy employees will demonstrate how the smart home assistants work and Geek Squad members can provide help with support and installation, which fits in with the connected home strategy.

Joly said his company’s mission is to offer customers the best products in the market, and he puts Amazon’s Echo devices and its Fire TVs in that category. Joly said that means “showcasing in our stores products from people who sometimes are our competitors.”

Amazon also indirectly helped Best Buy’s online sales in July. Joly told analysts on its second-quarter earnings call that Amazon Prime Day was “quite strong for us.” In fact, Best Buy’s online comparable sales grew more than 31 percent in the second quarter, the strongest result under Joly yet.

Although Best Buy also posted its strongest same-store sales growth in seven years, its shares plunged more than 5 percent that August day after Joly and CFO Corie Barry laid out their holiday projections.

The executives warned analysts not to get used to 5.4 percent growth as “the new normal.”

They also said the holiday quarter is hard to predict because it has very different characteristics than the rest of the year, particularly with the expectation for deep discounts from competitors.

The fact is while Best Buy has been on a nice streak, the retailer hasn’t turned in positive same-store sales growth during the holidays since 2014. Its current forecast doesn’t point to a break in this pattern.

Joly wouldn’t elaborate on his expectations for the all-important season. He said, he’s focused beyond it with Best Buy 2020.

Ever an optimist, Joly said “this is an opportunity-rich environment.”

But he’s also a realist, and understands the challenge that comes with the quickly evolving consumer landscape.

“It’s going to be a journey” Joly said. “We’re looking forward to it.”

Source: Tech CNBC
Best Buy CEO: We've fixed what was broken, now we are focused on growth

Comments are closed.