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Best Buy Co., Inc. (BBY): The Plan That Could Keep This Retailer’s Stock Rising

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Best Buy Co., Inc. (NYSE:BBY)Best Buy Co., Inc. (NYSE:BBY) has had surprisingly impressive performance in the markets during 2013. Since the beginning of the year, the stock has risen 147% thanks to new CEO Hubert Joly. The stock continues to rise despite a 2.6% decline in revenue to $9.38 billion in the last quarter . Even though company performance hasn’t yet accelerated under Joly, the CEO has implemented a detailed plan for the future growth.

Renew Blue

Best Buy Co., Inc. (NYSE:BBY)’s most recent quarter saw comparable-store sales decline 1.1% as a result of an early Super Bowl, which shifted TV sales to the last quarter of 2013, and an intentional reduction of sales in non-core areas.  The company is now focusing on improving these comparable-store sales and profitability through several priorities of the “Renew Blue” initiative.

First, Best Buy Co., Inc. (NYSE:BBY) is focusing on accelerating online growth. In the most recent quarter, the company invested in search engine and affiliate marketing and added product recommendation to the checkout process. These actions helped domestic comparable online sales increase 16% during the quarter. Moving forward, the company is going to make functional upgrades to its website that include a new search engine.

The company is also working on SEO optimization, which is a fancy way of saying  it’s trying to move its website towards the top of Google and other online searches. Historically, Best Buy Co., Inc. (NYSE:BBY) has undervalued its website’s potential and these investments should help improve overall earnings.

Second, the company is improving the multichannel customer experience which is the experience that a customer has across all aspects of the company.  The store, website, and coupon mailings are all part of the multichannel customer experience. . The company is achieving this improvement through efforts such as a “low price guarantee” and the “buy online, ship from store” initiative. Both efforts will increase customer convenience.

Third, the company will work to increase revenue and gross profit per square foot of store space, reducing space given to low-margin products like CDs and replacing it with high-margin products like mobile devices.

Fourth, Best Buy Co., Inc. (NYSE:BBY) will try to drive down its cost of goods sold by improving supply chain efficiency. It hopes to do this by optimizing how it replaces store inventory, expanding its online delivery capability, and improving the process that handles returns and product damages which costs the company roughly $400 million a year.

Another part of the Renew Blue initiative is an agreement with Microsoft Corporation (NASDAQ:MSFT) to create a store-within-a-store  . These mini Windows Stores will be in 600 Best Buy Co., Inc. (NYSE:BBY) locations and will feature Microsoft Corporation (NASDAQ:MSFT) computers, phones, and Xbox systems and accessories. These new stores should help Microsoft Corporation (NASDAQ:MSFT) turn around its computer sales slump. The stores will also help differentiate Best Buy from its online competitors.

If Best Buy can effectively implement its Renew Blue initiatives, then the company could see earnings increase through efficiency and improved online sales.

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