Best Buy Co Inc (NYSE:BBY) Reports Quarterly Drop In Gross Margins


Dallas, Texas 05/22/2014 (FINANCIALSTRENDS) – Best Buy Co Inc (NYSE:BBY), the largest electronics retailer, in the country has dropped almost 40% in 2014, after it registered a very remarkable surge – 236% in 2013. The French veteran, Hubert Joly, had taken over reins of the company 2012, as the CEO. He had outlined a very well-devised strategy that was named “Renew Blue,” and it had been named after the blue t-shirts that the BBY sales associates ear. The company’s investors also turned very optimistic when the new turnaround plan was introduced and hoped that it would get the company back on track.

The turnaround plan

But these sentiments could not hold the company’s fortunes and it reported a drop in sales in the holiday season- typically, this is the one time of year that retailers wait for and it is a very crucial time. But some market watchers say that the CEO’s turnaround strategy just might bear fruit in the near future. However, there were some things that he had tried that did not work at all. He has tried to eliminate the price issue as an obstacle. He thought of a match the price policy in an attempt to attract customers. The strategy worked in a very simple manner.

An idea that failed

The idea behind it was that customers should not leave the company’s stores just because they were able to procure that product at a lower price at another store. The unfortunate part was that it affected the company’s margins very badly and in the Q4, the company’s gross margins dropped the most down to 20.1% because the company was relying too heavily on markdowns to woo customers to its stores. In the course of the earnings call, the BBY management stated that it had been able to hike its market share after implementation of the price- matching policy.