Best Buy

Best Buy Co., Inc.  announced new strategic priorities in advance of today’s analyst and investor day presentations in New York City, according to a person familiar with the matter. Long term operating goals include an operating margin of 5%-6% and ROIC of 13%-15%, while short term goals include stabilization and expansion of comp (-2.0% LTM) and operating margin (4.2% LTM, down -70 bp y/y). New CEO Hubert Joly frames the existing problems as follows:

“While we are the 11th largest e-commerce player in the U.S. across all product categories, we have been too slow to capture our fair share of the online channel. While our customer satisfaction has been increasing in the last months, we have room for improvement. We have been suffering from a price perception issue. And, although our operating metrics are among the highest in the industry, our top line and bottom line performance have been declining. These trends, combined with the continued addition of stores well into the recession and the low returns achieved by certain acquisitions, have led to a decline in our return on invested capital.”

Preliminary Details: Mr. Joly intends to make Best Buy Co., Inc. (NYSE:BBY)  “THE preferred authority and destination for technology products and services”, and outlined 5 key priorities, including (1) reinvigorate and rejuvenate the customer experience, (2) attract, grow, engage, and inspire transformational leaders and energize employees, (3) work with vendor partners to innovate and drive value, (4) increase ROIC with revenue growth, efficiency, and disciplined capital allocation, and (5) continue BBYs leadership role in positively impacting the world. Today’s presentation will focus on these strategic priorities.

There is a significant amount of uncertainty with Best Buy Co., Inc. (NYSE:BBY), and any communication of new strategy or organization will work against uncertainty.

Best Buy Co., Inc. (NYSE:BBY) is the largest specialty retailer of consumer electronics, home office products, entertainment software, and appliances in the United States. At the end of FY11, Best Buy operated 1,447 U.S. Best Buy stores, including 305 BBY Mobile stand-alone stores. BBY also operated over 200 Best Buy Co., Inc. (NYSE:BBY) stores in Canada under the Best Buy, Future Shop, and BBY Mobile brand names, over 200 stores in China under the Five Star brand name, over 2,000 small box stores across Europe, and various locations in Mexico.

For the 27 weeks ended 04 August 2012, Best Buy Co., Inc. (NYSE:BBY) revenues decreased 1% to $22.16B. Net income before extraordinary items decreased 45% to $173M. Revenues reflect an International segment decrease of 10% to $5.53B, Comparable Store Sales Growth -%-Int decrease from -1.4 to -9.4%, and a Retail Sales-International decrease of 10% to $5.53B.

Disclosure: No position