MINNEAPOLIS – Less than two months into his tenure as Best Buy’s new CEO, and two weeks after Superstorm Sandy struck New York, Hubert Joly took the stage at a specially convened analyst’s meeting in Midtown Manhattan and laid out a turnaround plan for his own battered business.
Nearly one year later, the initiatives, dubbed Renew Blue, have begun taking root and the conversation has now changed from when Best Buy will close shop to which vendor will open the next in-store shop within its stores.
The changes were fomented while Joly assembled a new management dream team that includes celebrated chief financial officer Sharon McCollam, and contended with the unneeded distraction of a failed coup attempt by founder and ousted chairman Dick Schulze.
Despite the momentous challenges he faced, including earnings losses, sales and margin declines, and market share shifts as Amazon customers show-roomed his stores, Joly displayed an easy manner and a business savoir faire that distilled Best Buy’s problems down to manageable bullet points. Among his accomplishments:
• stabilized sales and realized a whopping 2,000 percent increase in second quarter profits;
• slashed $325 million in annualized costs out of a targeted $400 million in savings; and
• reduced the cost of goods sold by $65 million by revamping store replenishment, reducing its network of supply chain vendors, and re-selling returned items at the point of purchase.
Inside the stores, he famously forged boutique deals with Samsung, Microsoft and possibly Google that better utilized unproductive floor space while turning the chain’s 1,000 boxes into assets rather than liabilities.
He also increased the training and accountability of sales associates, which has led to rising customer satisfaction scores, overhauled a poorly integrated customer loyalty program, and blunted showrooming by enacting a year-round blanket price-match policy. As he said on a recent earnings call, “Our goal is … to eliminate price as an obstacle to buy.”
Online, where the tech retailer has inexplicably trailed its competitors in site functionality and sales performance, the company has:
• replaced its 10-year-old search platform;
• introduced dynamic product recommendations for customers browsing with empty carts;
• made it easier to attach Geek Squad services;
• implemented location-specific product offers;
• will quadruple the number of customer product reviews by year’s end to help improve close rates;
• is piloting a ship-from-store program that essentially turns stores into mini distribution centers, and;
• improved the mobile site to provide a richer tablet shopping experience.
The transformation hasn’t been lost on Wall Street, which has responded with a three-fold spike in the company’s share price this year. Noted Credit Suisse retail analyst Gary Balter, “The progress delivered in Q2 is an important signal that Best Buy is moving in the right direction and that management’s ambitious plans are beginning to translate into better results.”
Added Janney Montgomery Scott retail analyst David Strasser, “They are gaining share across categories and from virtually everyone in the space. We believe a re-energized sales force, a more optimized floor and stronger storelevel leadership are all driving better close rates and more Blue Shirt enthusiasm, which is driving increased market share across the store.”
Looking ahead, Investment Technology Group (ITG), a research and analysis firm, is projecting a 3 percent to 5 percent increase in same-store sales for the current quarter ending next month, the largest comp increase since 2010, and Janney’s Strasser is projecting continued share gains in TV through the holidays and beyond – suggesting that Christmas will be a lot merrier for Best Buy than it has been in years.
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