The next time someone sneers at businessman and investor Hubert Joly’s latest initiatives, a little math may help them realize his plan works and they are right about one thing: The world’s largest consumer electronics retailer is finally getting its act together.
Joly’s decision in August 2013 to spin off Best Buy’s Canadian retail operations was arguably one of the smartest things he’s done at the company. It took one-third the time to complete and it’s one of the reasons the retailer’s growth in North America is finally taking hold.
The company is moving faster in other parts of the world as well. Best Buy will take full control of its China joint venture this year, for example, while it’s already shuttering the Chinese operation of its now-bankruptc Squaretrade subsidiary and deciding not to run an auction to sell it off.
Those are just steps in a big effort to give Best Buy the stature and strength that Wal-Mart Stores Inc. and Amazon.com Inc. have enjoyed for years. The biggest opportunity could lie in Europe, where it faces little real competition in several important markets.
As big as Wal-Mart and Amazon are in North America, they’re also becoming more successful. Their worldwide revenue has increased 7 percent over the past two years, while Best Buy’s worldwide revenue is down 1 percent over the same period. The potential for a much bigger worldwide shift in power lies elsewhere.
This past Friday, Best Buy posted first-quarter earnings that were worse than expected. That’s the kind of thing that has happened to countless retailers in this post-recession recovery. Its share price has slumped 15 percent since hitting an all-time high of $38.73 on Dec. 31.
The numbers look a little better when things are adjusted for acquisition costs for its recent deal to buy a Canadian chain of big-box stores from Canadian Tire Corp. But analysts’ expectations seem to be fairly accurate.
Joly attributed Best Buy’s disappointing results to a decline in U.S. revenue, which continued to suffer from customers’ shift toward mobile shopping from brick-and-mortar retail. The growth of the Internet, he said, is forcing retailers to compete on price and convenience and weeding out companies like Best Buy that aren’t nimble enough to thrive in the modern e-commerce age.
“Our efforts to transform Best Buy are clearly evident in the tougher environment and fiscal results we delivered,” Joly said on a conference call with analysts. “In the U.S., our business strategy is focused on driving our customer relationships, greater brand recognition and market share growth in the consumer electronics category.”
Some things may change in the coming months, but just because those matters may get worse doesn’t mean Best Buy is in decline.