Microsoft PCs on display at a Best Buy store in Secaucus, New Jersey
Melissa Repko | CNBC
Best Buy The new plan was announced on Tuesday in an attempt to reverse a two-year sales slump and cash in on a long-awaited pandemic-era purchasing replacement cycle and a new wave of innovation.
The consumer electronics retailer said it would add trained sales teams to key parts of its stores, create more YouTube videos to pique customer curiosity and kick off marketing campaigns with a new slogan: “Imagine.”
Best Buy CEO Corey Barry told CNBC that customers told Best Buy that the retailer’s store experience and the technology they offer have “lost a little bit of their shine.” Innovation in consumer electronics has hit a plateau, she added.
“That’s our focus this year,” she said. “Put all the ‘new’ stuff back.”
One of Best Buy’s main hopes for driving sales comes from artificial intelligence laptops and smartphones.
However, the retailer doesn’t expect its sales to improve overnight. The company reported its 10th consecutive quarter of declines in comparable sales, a key metric that erases the impact of store openings and closings. Best Buy said in May that it expected full-year comparable sales to be basically the same as last year or to fall by as much as 3%.
Best Buy expects revenue to be between $41.3 billion and $42.6 billion, down from $46.3 billion last year. That range would put its revenue slightly below the $43.6 billion in the pre-pandemic fiscal year that ended in early 2020.
Barry said consumers are still “making very clear, value-based decisions.”
Best Buy’s stock price reflects the sales woes: As of Monday’s close, the stock was down about 36% from its all-time high of $138 hit during the coronavirus pandemic.
Steven Zaccone, an equity research analyst covering the retail sector at Citi Research, upgraded Best Buy stock to a buy from a sell in early June, in part due to an expected wave of new products .
But he acknowledged that trends are becoming more difficult to predict as consumers start to focus on their wallets after experiencing the highest inflation in decades and are distracted by the uncertainty of this year’s presidential election.
“People who are focused on the short term would say the category is still declining,” he said. “So this call is based on the pivot of wanting to be able to achieve growth.”
Wearable technology on display at Best Buy store in Secaucus, NJ
Melissa Repko | CNBC
Root replacement cycle
Best Buy executives and investors have reason to be optimistic. In each of the past two quarters, Best Buy has sold more laptops than the same period last year, an early sign that a replacement and upgrade cycle may be starting.
Last week, consumer purchases of consumer electronics such as tablets, TVs and Bluetooth speakers helped Drives sales to record $14.2 billion According to Adobe Analytics, this was seen on the US retailer’s website during Amazon’s two-day Prime event. it Changes from last year When inflation-weary shoppers take advantage of deals on household essentials. (Best Buy is one of the retailers participating in the Amazon-created retail holiday by offering its own deals.)
Best Buy’s ability to drive sales depends in part on its suppliers. It’s always eager to innovate and give customers new reasons to come to its stores or website.
Over the past few months, apple, Samsung and Microsoft New products have been announced, which may create hype and increase customer traffic. apple Launching a range of new iPads in May. Earlier this month, Samsung Launched the first “smart ring” It has health tracking features that rival Oura’s own ring and Apple Watch.
Elsewhere, Microsoft announced Collection of new computers In May, this included Copilot, an AI-powered chatbot. The collection includes about 40 different items, about 40% of which are exclusive to Best Buy, and will begin shipping in mid-June.
Barry said retail chains will benefit as customers see the leap in technology and stores offer entirely new businesses, such as rings, Can track sleep, physical activity, and more.
“Five years ago we would never have sold jewelry in our stores, and now we will have a whole range of health-oriented products that you can wear in really unique ways,” she said.
Best Buy is launching a new marketing campaign this back-to-school season that includes a “hologram” called Gram and a new slogan, “Imagine.”
Courtesy: Best Buy
Less specs, more discovery
Instead of gushing about the size of TVs and laptops, Best Buy employees focus on helping customers understand how the items can save them time or make their lives easier, Barry said.
Later this summer, customers will see more experiential displays in stores showcasing products like Tesla chargers, GoPro video equipment and Lovesac furniture. The company will also add dedicated teams in the computing, appliance and home theater sections of its stores, three key areas where customers often need support, Barry said.
Barry said these store associates will highlight unique features that customers may not know about, such as laptops with more than double the battery life, washer/dryer combos that allow them to wash two loads of clothes at the same time, or that can make a fitness space feel like a Like a spin studio.
On the Best Buy app, customers will see a personalized home screen, a new Discover tab and the ability to set alerts when items on their wish list go on sale.
The company plans to launch more than 500 videos on its YouTube channel, app and website by the end of the year. This is three times the number added last year.
As the back-to-school season approaches, Best Buy will run ads online, on streaming services and on social media, including a “hologram” called Gram.
“We definitely go the extra mile to differentiate ourselves and I think we’re the only ones who can help make that ‘what if?’ question come to life for our clients,” Barry said.
However, Best Buy will roll out this sharper customer strategy on a tighter budget. The retailer plans to spend about $750 million in capital expenditures this fiscal year, about $50 million less than last year, Barry said on the company’s earnings call in May. She said the company is cutting back on spending to “renovate” its roughly 900 U.S. stores rather than make major remodels and open new stores.
She told CNBC that the company’s dedicated teams in parts of the store will be made up of existing employees, supplemented by employees from suppliers.
A Best Buy store in Woodbridge, Virginia, USA, on Tuesday, May 21, 2024.
Nathan Howard | Bloomberg | Getty Images
“Murphy’s Headwind Law”
Over the past three years, Best Buy has faced “Murphy’s Law of Headwinds,” said Truist Securities equity research analyst Scott Ciccarelli, referring to the adage that “anything that can go wrong will go wrong.”
One of the challenges the company faces is that consumers have cut back on pricier purchases like smartphones as everyday costs such as food, gas and rent have risen. Rising interest rates have slowed transactions in the housing market, dampening demand for home-related purchases such as larger TVs or new kitchen appliances.
But Ciccarelli said Best Buy’s unusually high sales during the pandemic have caused the retailer the most trouble. It breaks the typical rhythm of shoppers replacing smartphones, laptops, home appliances and more as many of them purchased the technology while setting up home offices, gyms and kitchens during the coronavirus lockdown.
Additionally, consumer electronics brands have rolled out fewer game-changing technologies as they deal with temporary factory closures and supply chain congestion during the pandemic. Without those advances, Ciccarelli said, Best Buy has been stuck competing on price because it sells much the same devices as rivals like Amazon and Walmart, especially if customers have no reason to touch or feel the product before buying.
Consumer electronics has been a weaker category in retail, with year-to-date sales (in dollars) and units (in units) down at the end of June compared with the same period last year, according to market research firm Circana. fell by 4%, and in unit terms it fell by 5%. The market research firm’s definition includes most major devices, such as televisions, tablets and audio equipment, but excludes some categories sold by Best Buy, such as home appliances.
However, consumer electronics spending is up 5% this year compared to the pre-pandemic period in 2019, according to Circana.
Paul Gagnon, consumer technology industry consultant at Circana, said part of the growth comes from rising prices for computers, televisions and other goods. For example, he said that the average price of items in the headphone category has increased by 60% compared with 2019 as consumers tend to favor wireless earbuds such as Apple Airpods or headband wireless headphones.
The biggest sales season for consumer electronics is still ahead. About 57% of sales in the category have historically been made in the second half of the year, according to Circana.
The most important days for consumer electronics remain during back-to-school and the holidays.
