Best Buy sets $43 billion revenue goal for 2021
With its transformation deemed complete, Best Buy is looking for solid gains in profits and sales during the next several years. It also sees expanded opportunities for growth in new smart home initiatives.
On Tuesday, the retailer held its first investor meeting in five years. At the chain's last one, in 2012, Herbert Joly, who had just recently been appointed CEO, detailed his "Renew Blue" plan to transform Best Buy for the digital age, increase sales and boost profitability. Most industry experts agree that Joly's strategy has worked.
Best Buy has had four years of positive same-store increases. Its operating income rate is up, non-GAAP earnings per share have grown at a compound annual growth rate of 8% and total shareholder return over the last five years was 263%, ranking in the top 10% of S&P 500 companies.
“Our Renew Blue transformation was about improving the customer experience and fixing what was broken,” Joly said in a statement timed to coincide with the investor meeting." Building on what we have accomplished, we are excited by the opportunities we have in this next chapter to grow the company by helping customers pursue their passions and enrich their lives with the help of technology, which is a much bigger idea and one that is rich with opportunities.”
In the statement, the retailer set new financial targets for its long-term financial outlook. Best Buy delivered $1.4 billion in cost savings over the last five years. And, as previously announced, it plans to drive an incremental $600 million in annualized cost savings by the end of fiscal 2021.
The chain's new long-term financial targets for fiscal 2021 include revenue of $43 billion (versus $39.4 billion in fiscal 2017), and operating income of $1.9 billion to $2.0 billion (versus $1.7 billion in fiscal 2017). It anticipates adjusted earnings of $4.75 to $5.00 per share, which represents an 8% to 9% compound annual growth rate from fiscal 2017. Its income targets disappointed Wall Street analysts.
As it looks to future growth, Best Buy is expanding its smart home initiative with Vivint, which it launched in May. In October, the company will roll out the offering to 450 stores, and will also enhance the smart home areas in all of its stores. It will also add 1,500 dedicated smart home employees.
In other initiatives, Best Buy revealed is piloting a new service, Assured Living, that uses technology to help adult children remotely check in on the health and safety of their aging parents. The pilot, now available in two markets, aims to "create peace of mind for the children while allowing the parents to live and thrive independently," the company stated.
Best Buy is also looking to accelerate its growth by continuing to improve the customer experience within and across channels, more effectively addressing customer needs in underpenetrated categories and building its in-home channel. To that end, it recently expanded its in-home advisor program to all major U.S. markets. It now has 300 advisors who are trained to provide free in-home consultations to help customers find the right technology solutions for their unique needs.