NEW YORK – Best Buy wants to win the next frontier in retail: the home.
It already sells products that end up in people’s living rooms and kitchens. It delivers those items and sets them up in people’s homes. And now it wants to be consumers’ go-to when they can’t figure out why their internet isn’t working or to help aging adults live on their own longer.
“Think of us as the chief technology officer for your home,” CEO Corie Barry told analysts in her first major event since taking the reins of the company in June.
Over the next five years, the Richfield-based electronics retailer plans to double the number of its customer relationships that touch the home such as its tech-support services, in-home consultations, and remote-monitoring services of seniors, the retailer’s top executives told more than a hundred analysts gathered Wednesday in a gilded room on the sixth floor of the New York Stock Exchange.
Those additional services — along with the growth Best Buy expects in its core business selling TVs, appliances and wireless headphones — should help fuel more profitable sales growth, executives said in the two-plus hour presentation. They set a target of reaching $50 billion in sales in five years, up from about $43 billion currently.
That amounts to a 2.9% compound annual growth rate, a bit slower than the last couple of blockbuster years when strong consumer spending and the struggles of retailers such as Sears have helped boost Best Buy. But that would still be better than many other retailers.
Analysts had mixed feelings about the goals. During the question-and-answer period, one analyst wondered if Best Buy’s sales targets were too aggressive while another suggested the opportunity ahead of it could be much bigger.
The company also said it will cut another $1 billion in costs, on top of the $2.1 billion it has slashed since 2013, to help fund new initiatives and improve profitability over five years.
Best Buy’s shares were muted in response to the five-year plan, ending flat after initially dropping slightly.
“From a big overview, everything they’re doing is spot-on,” Craig Johnson, president of Customer Growth Partners said during a break. “The devil is in the execution.”
The investor meeting was the biggest stage thus far for Barry, who was named earlier this week to Fortune’s list of the most powerful women in business. At 44, she also is the youngest leader on the list of 50 women.
A Best Buy veteran of two decades, Barry quickly moved up the ranks and helped steer the company through its turnaround under her predecessor, Hubert Joly. Still company chairman, Joly, whom Barry acknowledged at the start of the meeting, sat beaming in the front row.
Best Buy last conducted an investor meeting two years ago at its Richfield headquarters when the retailer was just beginning to test some of its new initiatives.
Now the company has 600 in-home advisers around the country who provide free consultations and suggestions for how to troubleshoot problems or enhance people’s homes with technology. Its Total Tech Support program — which provides, for a $200 annual membership, unlimited tech support no matter where consumers bought items — already has more than 2 million members since launching a year ago.
And in the past year, Best Buy has invested more than $1 billion in acquisitions, most notably $800 million for GreatCall, which provides devices and monitoring services to help aging adults live in their homes longer, as well as a couple smaller “tuck-in” acquisitions.
Asheesh Saksena, who was named to the newly created position of president of Best Buy Health at the end of last year, said the company has set a goal of serving 5 million seniors in five years, up from about 1 million currently. He added that the retailer’s health monitoring service is already covered under insurance plans offered by Anthem, Centene and Molina Healthcare.
While still small in scale, he said he sees big potential for growth.
In the past couple of years, executives have confirmed that these are the right areas to accelerate, Barry told reporters before the presentation.
“The strategy is the right one,” she said. “We feel like there are good proof points. We feel like we’re directionally headed in the right space.”
Leading up to the meeting, there was a lot of buzz about a 64-page research report Morgan Stanley analyst Simeon Gutman dropped earlier this week exploring Best Buy’s opportunity in the health space.
Health care is “shaping up to be Best Buy’s next frontier of growth,” he wrote, estimating that it could bring in $11 billion to $46 billion in potential revenue over the long term. In the nearer term, it could add up to $500 million to $2 billion for Best Buy by 2025, which he noted was still attractive for retailers in this current environment.
Focusing on aging adults in particular is an “untapped white space opportunity” where potential competitors may find it daunting to match the reach and breadth of Best Buy’s 20,000-strong Geek Squad, he said.
In addition to deepening its relationships with its current customers, Best Buy executives said they are also looking at ways to attract new customers, for example, a new lease-to-own program rolling out across the country. About 65% of the customers using that program are either new or haven’t been to Best Buy in awhile, executives said.
In the next five years, Best Buy also will ramp up annual capital expenditures to $800 million to $1 billion, including technology, store remodels and its supply chain. For example, Best Buy currently can reach about 80% of customers with next-day delivery, but that will increase to 95% by this holiday season.
About 40% of Best Buy’s orders are picked up in-store — a number that’s growing. Barry acknowledged to reporters seems “counterintuitive” given how many ways consumers can get items delivered in an hour or a day.
“Some of it is the price point, the breakability, the value of what we sell,” she said. “I think people want some confidence around going in and grabbing it themselves.”
So as the company has recently reorganized its operating model to be more localized market by market, she said Best Buy is exploring ideas such as placing extra pickup spots in dense urban markets. One of those ideas is lockers, something Amazon has rolled out nationwide.
Best Buy also began testing curbside pickup in a handful of markets last week.
“The outlook for sustainable sales … is perhaps better today than two years ago given internal operating initiatives,” Peter Keith, an analyst with Piper Jaffray, wrote in a recent note to clients.
At the same time, the company’s shares are currently being dragged down by concerns about tariffs, and some on Wall Street are concerned about how much Best Buy will have to spend on these initiatives in order to stay competitive, he said.
Matt Bilunas, Best Buy’s chief financial officer, told investors the retailer is expecting some volatility in the next year or so given the tariff situation, which is one of the reasons executives decided to provide five-year targets instead of its more customary three-year financial goals.
He added that the company expects sales growth to be more modest the first few years into the plan and then to ramp up in the later years as its financial targets take hold.