Best Buy, reporting strong results for the first quarter of its fiscal year, says it is expanding tech offerings designed to help senior citizens live independent lives, and that health-focused wearables were among the quarter’s top performers. Small and large appliances also sold well, as did tablets and its tech-support offerings, while sales of entertainment products weakened.
Best Buy sales rose to $9.14 billion, from $9.11 billion in the same period a year ago, and same-store sales climbed 1.1%. Digital sales jumped 14%. Net earnings increased to $265 million, up from $208 million in the same period last year. Results came in ahead of Wall Street expectations.
In a webcast, the company updated the progress on its previously announced Best Buy 2020 strategy, which includes a health and wellness push “to enrich lives through technology.” Last year, it spent $800 million to acquire GreatCall, which markets devices and provides emergency response services to some 900,000 seniors. It also markets the JitterBug, a cellphone with an emergency call button that goes straight to its call centers.
This month, it bought Critical Signal Technologies, or CST, with another 100,000 subscribers, as it continues to build on that business, and executives say it plans to open an additional GreatCall call center.
“Our focus is to enable seniors to live longer in their homes and help reduce their healthcare costs,” says Hubert Joly, Best Buy’s outgoing chairman and CEO. “We believe that the combination of technology and our human touch, provided through the ability to access and engage people in their home, are a highly relevant and differentiated proposition.”
Its Assured Living plan costs $30 per month, providing an emergency call button and automatic alerts to family members about nighttime safety, activity levels, and when someone enters or leaves the home.
Joly says the company has begun offering a rent-to-buy program on many products, meant to appeal to people with either poor or no credit. He says the program has been especially appealing to those buying computers.
Analysts, impressed by Best Buy’s strength even as more consumers buy electronics online, aren’t yet convinced its emphasis on service will work. “We're intrigued by the early success of GreatCall and Total Tech Support, an ongoing, unlimited tech support offering priced at $199 annually or $20 per month,” writes R.J. Hottovy, the sector strategist who follows the company for Morningstar.
“On the surface, each of these initiatives makes sense given the expected growth of smart home devices, which we forecast to grow to $41 billion in the U.S. by 2020….and positive connected health and wellness trends, which management anticipates to grow to $48 billion in 2020 from $28 billion today.”
But Hottovy adds that many now-defunct electronics retailers have struck out with service plans, including Tweeter and hhgregg. And he expects other retailers, including Amazon and Walmart, to explore “ways to participate directly with their own service platforms, through partnerships with other service providers or listings on their third-party marketplaces.”