Best Buy focuses on growth, bets on appliances

Wed Nov 18, 2015 8:23pm EST
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By Nandita Bose

CHICAGO (Reuters) - Best Buy Co Inc (BBY.N: Quote) is betting that appliance sales will drive significant revenue growth in the future, a strategy that is likely to benefit the biggest U.S. electronics chain when it reports earnings on Thursday.

The Minneapolis-based retailer, which operates 1,400 stores in the United States, is focusing on growth again after some analysts feared it was flirting with bankruptcy just a few years ago, hurt by the rise of Inc (AMZN.O: Quote). It is now in the third phase of a turnaround plan engineered by Chief Executive Officer Hubert Joly, who took over in August 2012.

"The first phase was 'Don't die,'" Joly told Reuters in a recent interview. "Phase two was improve what we have, and we have clearly done that. Now we are in a position where we look to the future and say, 'How do we grow?'"

Analysts expect third-quarter earnings per share to rise 16 percent to 34.9 cents on sales of $8.83 billion, according to Thomson Reuters I/B/E/S.

Target Corp (TGT.N: Quote), Macy's Inc (M.N: Quote) and other retailers have indicated consumer caution going into the last quarter of the year, but home improvement chains have bucked the trend, in a potentially positive sign for Best Buy.

Appliances have emerged as one the fastest-growing segments within the company, with 19 quarters of comparable sales growth.

As of the fiscal quarter ended on Aug. 1, appliances contributed 10 percent of Best Buy's domestic revenue. That is up from 4.7 percent in fiscal 2010.

The company raised sales per square foot from $780 in 2010 to $870 in 2014, according to analysts, in part by changing the mix and presentation of appliances.   Continued...

Hubert Joly, Chairman and CEO of Best Buy, participates in a panel at the 2015 Fortune Global Forum in San Francisco, California November 2, 2015. REUTERS/Elijah Nouvelage