., Associated Press
Best Buy's Joly looking into buying familiar brands
- Article by: CHRIS BURRITT
- B loomberg News
- November 14, 2012 - 7:50 PM
NEW YORK - Best Buy Co. Inc. Chief Executive Hubert Joly is considering buying consumer electronics brands as a way of locking up exclusive merchandise as he seeks to turn around the world's largest gadgets retailer.
Examples of well-known brand names Best Buy could buy or license might include Hitachi and JVC, Joly, 53, said in an interview Wednesday. He also plans to expand Best Buy's private-label business, which includes the Insignia and Rocketfish brands. The company isn't interested in acquiring manufacturing capabilities, he said.
The move into exclusive merchandise is part of a strategy to reverse same-store sales that have slid in eight of the last nine quarters amid heightened competition from Amazon.com Inc. and Apple Inc. Joly is also accelerating a push into services, led by the Geek Squad, an army of 20,000 technicians. Another possibility is leasing consumer electronics to homeowners, generating fees from connecting and updating devices.
The services strategy is akin to what IBM Corp. achieved under former CEO Lou Gerstner, Joly said.
"Gerstner used services to lead the transformation of the company, and we have a similar opportunity," he said. "Services can play a huge role."
Best Buy posted a $1.2 billion net loss in its latest fiscal year and said last month that fiscal third-quarter profit will probably be "significantly" below last year's results as sales at established stores decline. The shares dropped 2.4 percent to close at $15.33. They have tumbled 34 percent this year.
Turnarounds by IBM, Starbucks Corp. and Ford Motor Co. serve as models for Best Buy, Joly said. The Richfield-based retailer lacks the connection to consumers enjoyed by rivals Apple and Amazon.
"Best Buy has lost a little bit of this," he said. "We need to reinvent our brand identity."
Joly, who took charge in September after the company received buyout overtures from founder Richard Schulze, met with analysts Tuesday in New York and laid out his strategy to revive the retailer. Dubbed "Renew Blue," after the shirts worn by store employees, the effort aims to improve service by giving employees more training, working with vendors on exclusive products and cutting costs to improve profitability.
"I like that Joly has a lot of ideas and is open to trying lots of different things," Colin McGranahan, an analyst at Sanford C. Bernstein & Co. in New York, said. "But the structural challenges are still very significant."
Leasing electronics to consumers is "a neat idea but a very niche idea and a very niche market," said McGranahan, who rates Best Buy as "hold." "Does the consumer want a tired brand or do they want Samsung?"
© 2015 Star Tribune