Is Best Buy’s ‘Renew Blue’ igniting a turnaround?

Discussion
Nov 21, 2014
George Anderson

It may be too soon for Best Buy stakeholders to break out into a chorus of "Happy Days Are Here Again," but there’s no doubt that Wall Street was both surprised and impressed with the chain’s results during the third quarter.

Same-store sales at the chain grew 2.2 percent during the quarter (up 2.4 percent for U.S. stores), much better than the two percent decline predicted by analysts. The company pointed to strong sales of televisions, computers and tablets as well as increases in gaming and appliances for its positive performance.

CEO Hubert Joly, who joined Best Buy in 2012, has been credited with getting the company’s finances in order through a series of cost-cutting measures. At Best Buy’s annual shareholders meeting in June, Mr. Joly spoke about the next phase of the company’s turnaround, "Renew Blue, Ignite the Possible," which includes the expansion of its store-within-a-store concept highlighting major brands, including Microsoft and Sony. The initiative also includes the development of market level strategies so the company can react more effectively to local conditions.

Looking ahead to Best Buy’s fourth quarter, Mr. Joly expressed optimism for the company’s plans for the holidays. He pointed to customer-facing initiatives in key departments such as appliances, connected home and home theater; increased inventory in stores, as the company has expanded ship-from-store from 400 stores in 2013 to 1,400 at present; and a clearer value proposition defined by the company’s tagline — "Expert Service. Unbeatable Price."

Mr. Joly, however, was clear on the company’s third quarter earnings call with analysts that a variety of factors could affect Best Buy’s numbers. He pointed to a "very intense" promotional environment as a key element in this year’s competition for market share. "If anything, it’s probably a little bit more intense than last year," he said.

What do you see as the key elements of Best Buy’s turnaround efforts under Hubert Joly? What do you expect from the chain during the holiday season and beyond?

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12 Comments on "Is Best Buy’s ‘Renew Blue’ igniting a turnaround?"


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Max Goldberg
Guest
6 years 3 months ago

Price match, increased inventory and Amazon paying sales tax have contributed to the lift in sales. If consumers can buy products at Best Buy for the same price as Amazon and other online merchants, and if the item is in stock, why not be instantly gratified?

Same-store sales are one statistic. Let’s see how Best Buy does with profits. The price match strategy can be a slippery slope. It’s like the old adage: I’m losing money on every sale, but I’m making it up in volume.”

Ed Rosenbaum
Guest
6 years 3 months ago

The holiday season should go a long way to determine if the turnaround is real. I hope it is.

Gordon Arnold
Guest
6 years 3 months ago

The third quarter numbers show a definite improvement for the company. The slight sales increase with a very good profit improvement demonstrates that the finances are in much better shape. As we know, the fourth quarter is all about traffic and sales. This is where we will see the effectiveness of the new and improved costs of the business plan now in place. I am not too confident in selling space for a store-within-a-store. There is no sign of a talent for market expansion or development in this farmers’ market push. I look to see the first quarter of F/Y 2015 to determine a pass or fail for this move.

Lee Kent
Guest
6 years 3 months ago

Store-within-store concepts go a long way when the SWS is manned by someone proficient in the products being sold. I believe this has been the case with Best Buy, at least from my perspective.

If the consumer can go into a store, see and talk to an expert about the product and get a decent price, they are far more likely to buy. And buy they have. That’s my 2 cents!

James Tenser
Guest
6 years 3 months ago

Best Buy may well be on to something when it put “Expert Service” ahead of “Unbeatable Price” in its updated tag line.

For several of its core categories—like connected home, home theater, and mobile/personal computing—normal folks struggle to make the elements work together smoothly. So what if you can save $15 on your next flat-screen if you don’t know how to make it play videos from your personal cloud? Or control your WIFI lights and thermostat with your mobile device?

It’s not just about getting the lowest price on the component or appliance any more, it’s also about having a satisfying experience when you use it. BBY may yet be able to make a living by helping its customers move beyond the bare-bones experience.

Carol Spieckerman
Guest
6 years 3 months ago

Hubert Joly’s bluster-free, transparent and realistic plan to bring out the best in Best Buy is paying off. Layer on Sharon McCollam’s eye on cost-cutting and efficiency-driving and Best Buy has some real momentum going into the heated holiday season and into 2015. A new foundation has been laid. Now real progress can be made.

Kai Clarke
Guest
6 years 3 months ago

Promotions and out-of-stocks. Best Buy’s stores were notoriously understocked and behind the curve where product availability were concerned. Fixing this meant more sales (you cannot sell what you don’t have). Add financial cuts to the mix and you have a game changer. The true question is, how long will this last?

Naomi K. Shapiro
Guest
Naomi K. Shapiro
6 years 3 months ago
After hitting lows, Best Buy seems well on its way as “… a viable competitor of online counterparts… a two or three year journey,” according to CEO Hubert Joly a year ago as he outlined plans to bring Best Buy into modern competition. Those plans included: 1. Focusing a new rewards program on the individual shopper—enhancing the shopping experience and building loyalty. 2. Working to counter the problem of online information not keeping up with real inventory in a store. 3. Setting up in-store fulfillment centers. 4. Having in-store pick-up from Best Buy’s web store (a convenience used in about 40% of the company’s online purchases). 5. Selling returned products online (which the company used to liquidate at big loss). 6. Creation of in-store boutiques. Best Buy has installed Samsung “experience” stores through most of its locations, and is now working to establish Microsoft and Apple experience stores under the same roof. 7. Price matching. Best Buy instituted a program to match the prices of 19 online competitors, as well as local stores; plus rebates… Read more »
Karen S. Herman
Guest
6 years 3 months ago

As part of a very smart CRM strategy, Best Buy sent me one marketing email last month that very neatly outlined every possible way the company was ready to assist and support my holiday shopping.

Entitled “Our Promise to You. Expert Service. Unbeatable Price,” the email quickly conveyed the newest product information, price match and financing options, in-store shopping experiences or the option to make an online purchase and schedule in-store pickup for the same day, at 1400 stores.

This email also directed me to the “newly transformed” Best Buy website offering a gift center, buying guides, customer reviews and online chat. It summarized with assurances of the Geek Squad expertise and an extended return promise, and closed with a personal message from Mr. Joly.

Folksy, informative and hot linked to the hilt, this email was perfectly structured for click-throughs and purchases.

Simply brilliant.

Shep Hyken
Guest
6 years 3 months ago

Best Buy has stepped up to the challenge. Their competition isn’t necessarily the store down the street. It’s the store on the customer’s smart phone and computer. Online retailers have taken business away from Best Buy. Best Buy stepped up and price matched while still giving the customer the service they have wanted. This may create an increase in sales. The next year will be interesting as well see if the price matching and customer service erode margins in what is a price-sensitive environment. I expect that between Best Buy’s on-premise and online offerings, they will do just fine this holiday season. And it doesn’t hurt that the economy is better than it’s been in a long time.

RIchard Hernandez
Guest
6 years 3 months ago

This is very good to see. A few years ago it was a foregone conclusion that Best Buy was on its way to going the way of CompUSA and Circuit City.

A slow and steady strategy on turnaround has been effective and a focus on customer service is now part of its plan forward. There is definitely a lot of promotional pricing in the CE arena, but I believe they can overcome that and keep the ship moving forward. Good for them.

Mark Price
Guest
Mark Price
6 years 3 months ago

The key elements of Joly’s strategy that have worked have been focusing the organization on a limited number of initiatives that directly impact customer experience in-store, and cleaning up the digital business with an expansion of buy online, ship to store. Price matching was a painful but necessary step as well.

This year, new video games, tablets, TVs, and a recovering economic environment are all helping as well.

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