CE Pro 100: Why Best Buy is No. 1
Yes, Best Buy is facing serious competitive influences to its retail business. And company president had to resign in scandal, while founder Richard Schulze was making overtures to purchase the company. Despite all the bad press, according to the company’s Fiscal year 2012 annual Report, Best Buy’s total revenue grew to $50.7 billion in 2012, up about $1 billion from the previous year, growth of about 1.5 percent. and about $600 million of that growth was in the domestic U.S.
But in the world of public companies, it’s all about pleasing shareholders and keeping the stock price higher. Total profits were down, but the company still made $1.8 billion in profit last year. That’s why the company embarked on some cost-cutting moves, closing a handful of Best Buy locations and one Magnolia. The big cost savings came in staff , where the company’s slashed nearly 3,000 employees.
Best Buy readily admits that sales fell in “several key consumer electronics product categories” and the company’s overall marketshare declined, specifically in televisions. Same-store sales of consumer electronics fell 5.4 percent year vs. year.
So how did the company’s revenues still grow? Custom integration services had a lot to do with it. Best Buy had double-digit gains in computing and mobile phones, as well as in appliances. Meanwhile, its “services” business remained steady, accounting for 6 percent of overall sales. “Services” include installation and extended warranties, although Best Buy does not break apart the two components of that category.
Last year, based on public statements by Best Buy execs in various other media, CE Pro was able to estimate that approximately 4 percent of the company’s total revenues are derived from installation services. The three-location AudioVisions division experienced double-digit increases in revenues and installations last year.