Best Buy (BBY) Hogs the Limelight on Smart Omni-Channel Moves
Best Buy's (BBY) omni-channel abilities including total tech and curbside-pickup service are very encouraging.
Best Buy Co., Inc. BBY has been making stupendous efforts ever since the outbreak of the COVID-19 pandemic. The company’s extraordinary digital efforts to cater to consumer demand amid the jittery situation are commendable. Its quick shift to a contactless curbside service-only operating model in the wake of the pandemic worked wonders. It also added functionalities to its curbside-pickup service for driving frequency, retention and personalization opportunities. These efforts helped the company efficiently maneuver the tough environment.
The company is constantly conducting various tests and pilots to turn into a more customer-centric, digitally-focused and efficient company. Its membership drive under the new name ‘Best Buy total tech’ ahead of the holidays is quite a wise move. This program offers unlimited Geek Squad technical support at exclusive member pricing with free shipping and standard installation. As part of this national rollout, Best Buy will convert its 3.1 million present total tech support members into the new program.
In fact, per media reports, analysts at Piper Sandler are quite optimistic about the company’s new membership program. This program is likely to attract new signups and drive consumer traffic in the holiday period. Post this statement, shares of this consumer-electronics player climbed about 5% in the trading session on Sep 27. So far this year, the stock has gained 18.7% compared with the industry’s 29.5% rally.
Last year, the company introduced an important membership pilot called Best Buy Beta. This encompasses unlimited Geek Squad technical support on the entire technology including 24/7 VIP access. Management had earlier highlighted to scale up the program nationally across stores and online at the end of the third quarter of fiscal 2022 under the new name Best Buy total tech. Under the same, consumers can avail several benefits with a two-year warranty protection at $200 price per year on everything, right from discounts, no-cost delivery to concierge service, etc.
Moving on, management is focused on making significant investments in fundamental technology capabilities, such as data and analytics as well as cloud migration to drive scale, efficiency and effectiveness. It is on track to launch its virtual store to develop a new digital communication platform combining multiple systems into one experience for call, chat, video and screen sharing. The company is also piloting a mobile app checkout so that customers can efficiently check out without the need of interaction. Such well chalked-out plans are likely to keep contributing to the company’s online revenues.
Best Buy continuously focuses on improving its digital capabilities including the omni-channel service boost, such as buy online, pickup in store services. The company leveraged stores to drive fast and convenient fulfillment of online orders. In the second quarter of fiscal 2022, it witnessed nearly 60% of its online revenues being fulfilled by stores consisting of in-store or curbside pickup, ship-from-store facility or employees delivering product to customers in more than 450 stores.
In the second quarter, as a percentage of the overall Domestic revenues, online revenues contributed 31.7%, up from 16% seen in same quarter of fiscal 2020. Such online growth contributed to the overall enterprise revenues, which rose 19.6% year over year in the same quarter.
With respect to its physical stores and operating model, Best Buy is piloting and testing many formats including experiential stores. The company will be testing an array of several prototypes with remodeling a number of stores to 15,000, 25,000 and 35,000 square foot stores apart from launching a few smaller 5,000 square foot outlets. Management expects a full rollout of the pilot in the coming few quarters. Best Buy is also expanding its product assortments. During the back half of fiscal 2022, management intends to add products to its fitness, beauty, sleep, pain management, vision, hearing and electric transportation categories.
Wrapping up, Best Buy seems well poised to tap the growth opportunities, given its solid tech-agnostic drives. While the aforesaid efforts are likely to drive sales steadily, the company’s earnings status looks no less favorable. It delivered an earnings surprise of 31.9% in the trailing four quarters, on average.
The Zacks Consensus Estimate for 2022 sales and earnings is currently pegged at $51.75 billion and $9.95 per share, respectively. These estimates suggest corresponding growth of about 10% and 26% from the respective year-ago reported figures. An expected long-term earnings growth rate of 6.4% for this currently Zacks Rank #1 (Strong Buy) stock further exhibits strength. You can see the complete list of today’s Zacks #1 Rank stocks here.
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