November 26, 2018
There’s been a leadership shuffle at Best Buy Co., the country’s top consumer electronics chain and a key seller of DVD, Blu-ray Disc and 4K Ultra HD Blu-ray, as the chain implements a new strategy and prepares for what it hopes will be a holiday sales rush.
Speaking with analysts on a Nov. 20 earnings call, CEO Hubert Joly said that during the preceding quarter, chief financial officer Corie Barry has been promoted to senior executive vice president, chief transformation and finance officer, “responsible for orchestrating our transformation,” according to a transcript of the call provided by Seeking Alpha.
Also, he said, Mike Mohan has been promoted to chief operating officer for the company’s U.S. business, “responsible for running the domestic business and, in partnership with Corrie, getting us to where we want to be as a company.”
Barry now oversees Best Buy’s strategic growth office, health business, “and a newly created transformation team in our digital and technology organization,” Joly said. “This focus on transformation underscores the major pivot we’re making as an organization with our Best Buy 2020 strategy as we are moving from a transaction to a relationship orientation and evolving from a product to a need-based solution orientation.”
Mohan has been with Best Buy since 2004 and has been responsible for Best Buy’s merchandising, marketing and supply chain functions. “He now has added all the channels including online, in-store and home, and our services teams to his scope,” Joly said.
Recapping the quarter that ended Nov. 3, Joly told analysts that the Best Buy team “just delivered another strong quarter and we continued to make progress in the implementation of our strategy. We are excited about our continued momentum and the opportunities we have ahead of us. So, specifically, in the third quarter, we grew enterprise comparable sales by 4.3% on top of 4.4% last year, and we delivered non-GAAP diluted EPS of $0.93, which is up 19% compared to last year.
“We also continued to enhance the experience we provide to our customers across the many ways they interact with us. Our top-line performance was driven by positive comparable sales across all channels, geographies and most product categories. Similar to the first half of the year, our strong revenue growth in the quarter was helped by favorable environment and driven by how customers are responding to the unique and elevated experience we are building.”
He praised the team for its “passionate focus on implementing our Best Buy 2020 strategy and on continuing to build the company that has a unique, competitive positioning and a strong human, purposeful culture.”
In October, Joly said, Best Buy “completed the acquisition of GreatCall, a leading connected health services provider for aging consumers. GreatCall’s life in its new home is off to a great start. We are working together to bring existing solutions to more customers and help fuel future growth in both the consumer and commercial markets. As such, and as a first step, we’ve recently rolled out new dedicated endcaps in our mobile department that showcase GreatCall’s easy-to-use mobile phone products and connected devices that are tailored for seniors and come with a range of relevant services…. Beyond this, we are excited about the opportunities that lie ahead for us to help aging consumers live longer in their homes with the use of technology, something that can provide significant benefits for the seniors and their families as well as for payers and providers.”
During the third quarter, Joly said, “we also continued to see encouraging results from our Total Tech Support program that we rolled out nationally in May. Customer signups as well as fulfillment costs are tracking in line with our expectations. Having a service that provides unlimited Geek Squad support for all their technology, no matter where or when they bought is a compelling and unique value proposition for our members. In addition, discounts on installations, protection and in-home services provide customers with another reason to grow their relationship with Best Buy.”
During the quarter, he said, Best Buy expanded its free in-home advisor consultation program to approximately 530 advisors compared to 300 at the nationwide launch a year ago. “As expected, it is proving out to be an important part of our strategy to build deeper and more relationship-based experiences with our customers,” he said. “We are continuing to invest in customer experience enhancements. So, for example, we just rolled out the ability for our customers to make an appointment with an advisor while they are still in our stores, rather than leaving the store and waiting for us to call and schedule an appointment.”
Joly also talked about the company’s efforts to improve the multi-channel shopping experience. “We’re especially excited about the ways in which we are making it easier for our customers to use the Best Buy app to shop online and in our stores,” he said. “Let me give you a few examples. Frequently, we see customers in-store trying to compare multiple products to one another including specs, price, reviews or features. With the Best Buy app, they can now use their phone to scan products and use an in-app feature to easily compare the results. If they want, they can save these results for later, if they’re still researching a purchase.”
Best Buy also recently launched a new functionality “that makes it much easier for customers to find open box items both online and in-store,” Joly told analysts on the call. “In addition to increasing the ease of shopping, this feature raises customer confidence in purchasing these types of products by being more clear about the meaning of different condition categories, as well as the eligibility of any existing manufacturer’s warranty or Geek Squad protection.
“The app also makes it easier for customers to determine whether a given product is currently available in the local store. Taking it one step further, we just launched a feature that can notify a customer, if a product in their online cart is currently available in the store they are in. This is helpful because customers often use the online cart as a way of keeping track of products they’re interested in. In fact, 72% of customers who use the app come into one of our stores with an item already in their cart and we now have the ability to tell them in the moment that the product is available for purchase.”
Also new is the “On My Way” feature, which allows customers buying large items to use the app to tell their local store that they are on their way to pick up their purchase, so that when they get there the item is available for pickup at the front of the store.
“These innovations along with the dozens we’ve rolled out in recent quarters, continue to blur the lines between online and physical shopping,” Joly said. “This is increasingly how our customers want to shop, and our innovation pipeline closely mirrors and enables this changing behavior. Consequently, our in-app conversion rate is up and the usage of the Best Buy app by customers while they are in our stores has increased significantly.”
Joly said that in the third quarter, “we continued focus on driving productivity and cost takeout to help offset investments and pressures in the business. We achieved approximately $90 million in additional annualized cost reductions bringing the cumulative total to $465 million since Q2 of fiscal 2018 towards our goal of fiscal ‘21 goal of $600 million. As we’ve discussed, we are investing in a range of enablers that are necessary to execute our Best Buy 2020 strategy. Most of them are multi-year investments in areas such as specialty labor, enterprise customer relationship management, knowledge management capabilities, our services platform and our supply chain.
“We’re tracking according to plan on our investments, and we are pleased to see how they are beginning to return. So, for example, in supply chain, we’ve seen our net promoter score for metro home delivery of large appliances and TVs increase more than 1,700 basis points over the last two years. This is due to investments in things like new metro delivery pads, located close to customers as well as a 60% increase in our distribution center square footage, which significantly decreases the reliance on outside space, and increases efficiency and accuracy.”
Looking ahead, Joly told analysts, “we are excited about our holiday plans and everything we have to offer our customers this holiday season. What matters of course during holiday includes assortments, deals, product availability, help, convenience and speed. And our team has put together a best-in-class assortment, prepared an amazing set of deals and ensured we have great inventory availability across other product categories we carry. This makes us a natural destination for everything tech related including TVs, computing, gaming, a growing toy assortment, phones, smart home devices, and large and small appliances. We released our Black Friday ad two weeks ago with 52 pages of the best deals of the holiday to help our customers find the best deals for their friends and families.
“Notably, this will be our first holiday with Total Tech Support and we excited to offer it to customers as a giftable item. This is the number one thing our retail teams have been asking for since the launch of Total Tech Support last May. It is a great way for gift givers to ensure the technology they’re giving to their loved ones, will be set up and working as it should be. Once again, this year, we offer our customers compelling delivery options such as free shipping on everything all season long, fast in-store pickup that can be ready in one hour, and same day and next day delivery options.
“We also materially upgraded our online gift center and our new gift finder will make it easier to get just the right gifts for kids, teens, parents, grandparents, significant others and families. For customers in our stores, our Blue Shirt Associates, Geek Squad agents and in-home advisors are ready to help our customers find great gifts and solutions. Whether you’re shopping digitally or in our stores, Best Buy can help customers find gifts for everyone on their gift list.”
Looking into next year, Joly told analysts, “I would say three things today. One, as you know, this is a dynamic situation with the expectation as of now that the tariff on the current list increases to 25% on January 1st; two my personal view is that while the journey may not be linear, the trade negotiations with China will progress; three, we believe that working together, vendors and our team, have at their disposal a range of effective ways to mitigate the effects of tariffs which is precisely what we are working on. And we’ll of course continue to update you on this matter.
“So, in conclusion, we are, as you can tell, energized by our continued momentum and overall performance and encouraged by the progress we’re making in implementing Best Buy 2020: Building the New Blue strategy. We see significant value generation opportunity ahead of us by successfully enriching lives with technology and providing services and solutions that solve real customer needs.”