Best Buy Bounces Back
While still facing a competitive future, Best Buy shocked many a retail observer merely by stabilizing its business over the last year.
The second quarter marked the electronic chain’s first quarterly profit in a year. Comparable-store sales increased for the first time in two-and-a-half years during the third quarter. Its stock more than tripled in 2013.
Under the direction of Hubert Joly, who took over as CEO in September 2012, Best Buy gets most credit for its move earlier this year to match rivals’ online prices, eliminating much of the threat of showrooming in one swoop. Best Buy also promoted heavily this holiday season at the expense of fourth-quarter margins, but the move has been praised as necessary to overcome the perception that Best Buy’s prices are higher than Amazon.com and Walmart.
"Our goal is not to be lower than the competition," Mr. Joly told The New York Times in December. "It’s to offer a very compelling set of customer promises with the assortment, the advice, the convenience, the service. So our goal is simply to eliminate price as an obstacle to buying."
To offset those margins pressures, Best Buy has cut expenses by more than $500 million by removing layers of management, cutting jobs and closing some stores. Removing several managerial layers is also said to have improved the ability to rapidly adjust promotions.
Other moves Best Buy has earned kudos for:
- Dedicating more space to faster-growing products such as smartphones and tablets;
- Letting vendors such as Samsung Electronics and Microsoft run their own boutiques inside Best Buy to ease issues related to excess square footage, customer service and pricing pressures;
- Increasing the number of Black Friday door buster deals, hosting exclusive events for "My Best Buy" members and opening its stores at 6 p.m. on Thanksgiving.
Mr. Joly told the Minneapolis Star Tribune in late November that Best Buy is only "about a quarter or a third" through what the company calls its "Renew Blue Transformation." The initiative includes investing in employee training, store revamps, and its website, including adding online ship-from-store and buy-online, in-store pickup.
Mr. Joly pointed to the launch of online buying guides for the holiday season as "a beginning" of what he said is an overall mission to reestablish Best Buy as retail’s authority on electronics and appliances.
"In the past when we have been criticized at Best Buy, it’s not that these promises were not the right ones," Mr. Joly told the Trib. "It is because we did not execute well enough."
- Renew Blue Transformation October Investor Meeting – Best Buy
- Underdog Against Amazon, Best Buy Charges Ahead – The New York Times (tiered sub.)
- Analysis: Best Buy could climb higher if CEO Joly lives up to hype – Reuters
- Best Buy ‘Won’ Holiday: Analyst – TWICE (tiered sub.)
- Schafer: Joly says overhaul at Best Buy is just starting – Minneapolis Star Tribune (tiered sub.)
What has impressed you so far in Mr. Joly’s turnaround approach at Best Buy? What challenges does Best Buy still face?