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Best_Buy_Fall_2017.pdf - Best Buy Co Inc Me Graw Hill...

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Best Buy Co., Inc. Me Graw Hill Education MHE-FTR-039 1259420477^ REV; SEPTEMBER 30, 2015 MARNE L. ARTHAUD-DAY FRANK T. ROTHAERMEL Best Buy Co., Inc. Shortly after assuming office. Best Buy's chief executive officer (CEO) Hubert Joly shared a bmad outlme of Ws turnaround plan-dubbed "Renew Blue"-with investors. His goal was to address what he saw as Best Buy s two mam problems: declining comps and margins. Three years into his recovery efforts, Joly was proud of what he had accomplished thus far. After four years of negative dome^ tic coinparable sales, fiscal year 2015 posted a 0.5 percent sales increase. The company's domestic non-GAAP (generally accepted account principles) operating income had also reversed its four-year downward trend and mcreased from 3.1 to 4.1 percent. Non-GAAP earnings per share for continuing operations were up 26 percent over 2014, and the company had posted a $1.3 billion increase in cash cash equivalents, and short-term investments at year end.^ This represented a dramatic improvement over the company Joly had inherited in September 2012 Despite being the world's largest retailer of consumer electronics with $50 billion in annual sales. Best Buy s fmancial situation at that time was precarious. The company's stock price had fallen from $45 to $15 per share over a two-year period, a drop of roughly 60 percent.^ Earlier that same year. Best Buy had been forced to report a 91 percent drop in profits during the second quarter compared to the same period in 2011 ; the third quarter showed a 97 percent drop in operating income.^ As Joly had previ - ously told investors, one of his first priorities had been to stabilize the company before he could imple - ment ways to improve its performance.® ^ Now that the company was on solid ground, he looked forward to building on its strengths "to define ^d take the actions that will allow us to win in the marketplace, and to be seen by all of our s akeholders as the best buy." As Joly saw it. Best Buy sold far more consumer electronics than either of Its largest competitors ($50 billion compared to ~$30 billion for Walmart and $14 billion for Amazon) and dominated the PC, camera, and tablet categories in terms of market share. It also had state-of-the- art logistics, inventory, and support systems that enabled it to make same-day deliveries for online orders. Meanwhile, Best Buy's online business was the eleventh largest e-commerce site worldwide and was growing by 15 to 20 percent each quarter.^ Despite the fact that competition in the consumer-electronics industry remained cut-throat, Joly was convinced that the company's mix of "Expert Service. Unbeatable Prices." provided a clear value prop - osition. Recently, even the critics had started to agree with him. Instead of predicting that Best Buy was doomed to follow other national consumer electronics retail superstores into extinction, analysts
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Rothaermel, Strategic Management:Concepts and Cases Best Buy Co., Inc.
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