Despite closing 13 big box and 24 mobile-focused stores as part of a three-year, $400 million cost reduction plan, Best Buy executives remain bullish on the importance of the physical location to the customer experience and its future success, even as it keeps an eye on the overall footprint.
Best Buy CEO Hubert Joly told analysts that while it’s increasingly difficult to measure the contribution from each channel, the purchase path most often leads from online to the store.
“If you are going to buy a 4K TV, the only way to see the quality of the picture and ask questions is really in the store,” Joly said according to Seeking Alpha. “But then the transaction may be completed in the store or online. So our overall goal as a company frankly is to accelerate the total revenue growth from existing customers and new customers so that we can create shareholder value and value for all of the stakeholders.”
If overall revenue were flat, Joly said, “it would put pressure on the economics in the business” as far as the store count is concerned.
“From a store portfolio standpoint, since the beginning of the Renew Blue (cost reduction) journey, we have said that we would over time optimize the store footprint, and we’re doing this on an ongoing basis and we are ready to continue to do that,” he said. “But I would say the overriding objective is to accelerate the growth so that it can lift our boats in our journey.”
Domestic revenue for Best Buy fell 0.8% in the quarter, from $7.9 billion to $7.8 billion, hurt by the store closures as well as price deflation. For instance, the average price of a 4K TV fell 30% during the quarter, according NPD data, Joly said. Same-store sales were flat, compared to a down prediction from analysts, who don’t see growth in that category anytime soon.
Sales in Best Buy’s company’s bread-and-butter computing and mobile phone segment were down 3.5%, better than the 6.8% drop in the fourth quarter but higher than the year-ago period. A lack of innovative products is partly to blame, and Best Buy and other consumer electronics retailers are looking to the iPhone 7 to boost latter-half results.
Investments and improvements to its ecommerce website, including streamlined checkout, better product search and an upgraded mobile experience, helped fuel a 24% increase in online sales during the first quarter, Joly said.
“It’s a combination of what’s happening on the site, the shipping experience (and shipping speed), improved in-store pickup and the experience in the stores,” Joly said. “So it’s an all-out effort.”
Best Buy also announced the departure of CFO Sharon McCollam, who had come out of retirement in 2012 and was credited with helping to turn the company around. McCollam will stay on through the end of the year in an advisory capacity. She will be replaced by Corie Barry, the current chief strategic growth officer and a 16-year Best Buy veteran who has been groomed by McCollam.