Best Buy Not Ready to ‘Size’ 5-Year Market Opportunity From 5G, Says COO
Best Buy “has a proven history of commercializing all new technologies” but won’t “size” the five-year financial opportunity from 5G, Chief Operating Officer Mike Mohan told the retailer’s analyst day conference Wednesday. Best Buy’s target is to grow revenue to $50 billion in the fiscal year ending February 2025 from the current FY 2020 guidance of $43.1 billion to $43.6 billion, and to do so with $1 billion of additional cost reductions and efficiencies, said the company. CEO Corie Barry told the conference the goals were “aggressive but attainable.”
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The retailer will work with carriers on 5G to fashion “the best ways to leverage what they would like to get done with our ability to know how to do it,” said Mohan. “The one thing we do know about 5G, it is going to be a market-by-market rollout.” Best Buy knows 5G “is coming, and it’s going to require a different type of sales model to get the best out of it,” he said.
Best Buy wants to be “more important to more households in the U.S.,” said Barry. “How do we matter to a household? Either we can help them buy the stuff or we keep it working.” The goal is to “create ongoing service relationships to help with that,” she said. “We’re at our best when we’re not just selling the right product or offering the right service.”
The goal is to take Best Buy’s “combination of tech and touch” to “build deeper, long-term relationships with our customers” by “leveraging our scale and market position as a CE expert,” said Barry. “Think of us as the chief technology officer for your home.”
Best Buy’s target is to double its number of “significant customer relationship events” to 50 million by FY 2025, said Barry. The focus will be on areas like Total Tech Support and other paid memberships, “where our customers have told us they love us," she said. Best Buy believes that love can "translate into long-term growth,” she said.
“We absolutely see our environment as opportunity-rich,” said Barry. “The CE industry is actually more stable than many believe,” she said. CE “continues a very steady line of growth,” and has done so for the past two decades, she said. “This runs counter to what may be the conventional, but inaccurate wisdom that we work in a volatile and cyclical industry.”
The CE category is “at least as stable as overall durable goods,” said Barry. “People spend a similar portion of their wallet on CE year in and year out, pointing to the real opportunity than can exist when you can unlock what’s possible.”
Technology innovation “has not stopped, and in our view, will only continue to ramp,” said Barry. That innovation's so “prolific” is a big reason “the CE industry continues to grow,” she said. “As 4G starts to reach its maximum benefit to consumers and the industry, 5G appears just over the horizon.” Best Buy’s “scale and focus on consumer electronics means we commercialize new technology in ways that our competition simply cannot,” she said.
The Section 301 tariffs on Chinese goods is creating "a complex and rapidly changing environment," said Chief Financial Officer Matt Bilunas. Best Buy estimates its current tariff exposure at 60 percent of its cost of goods sold, he said. It expects that to decline to "closer to 40 percent" next fiscal year, "as our vendors continue to move their manufacturing out of China and into other countries," he said. "We also believe that the actual impact to our business is a much smaller number" than those percentages might indicate, based "on the actions of our vendors and our own mitigation strategies."