NEW YORK Best Buy's (BBY) new CEO said Tuesday that its time for the struggling electronics chain to try to embrace one of its biggest problems, "showrooming" - when customers check out electronics at its stores and then buy them cheaper online.
Ten weeks into the job, CEO Hubert Joly and other Best Buy executives laid out plans to reverse the consumer electronics chain's slumping sales and declining profit during an analysts' meeting in New York, which was webcast.
This was the first chance for analysts to hear the plans Joly has for the company, which he laid out in detail, although he added that since he has only been on the job for a few weeks the plans are preliminary.
Joly, who is French, said the company's "raison d'etre" or "reason to exist" will be to shake off years of underperformance to become the "preferred authority and destination for technology products and services."
Most elements of the plan - cost cutting, rethinking store square footage, improving customer service in stores and creating a better experience online - have been discussed by Best Buy management for years, but Joly said he is putting plans in place he thinks will actually achieve results.
"Our performance has been unsatisfactory in a number of areas," he said. "Many of these problems are a result of our own making."
The meeting came a day after Joly named former Williams-Sonoma executive Sharon McCollam as Best Buy's new CFO, and as the busy holiday season revs up - when retailers can earn as much as 40 percent of annual sales.
It also happened as Best Buy co-founder and former Chairman Richard Schulze considers a plan to take the company private.
Minneapolis-based Best Buy tapped Joly in August to reverse a yearslong decline in its business as competition from online stores and discounters increased, and consumers' tastes shifted from more profitable items like TVs and desktop computers toward less profitable smartphones and tablets.
"Showrooming," when consumers stroll through Best Buy stores to check out merchandise but buy it elsewhere, is a challenge for the retailer. But Joly said during the analysts' meeting that "showrooming" actually isn't a bad thing for Best Buy, because it draws people into stores.
"Once customers are in our stores, they're ours to lose," he said.
Joly laid out his long-term financial targets for the company. First priority: to reverse a decline in revenue from stores open at least one year - a key retail metric because it excludes results from recently opened or closed stores.
Plans for that include converting more online and offline shoppers from browsers to buyers through redesigned stores, better trained employees and other incentives like online price matching.
He also eventually wants to achieve an operating margin of 5 to 6 percent. Operating margin is a ratio measuring how much revenue a company keeps after costs and expenses. In its most recent fiscal year its operating margin was 2.1 percent.
Joly said the company aims to cut $325 million in its cost of goods sold and $400 million in selling, general and administrative expenses, but he added no layoffs are expected.
It is also evaluating square-footage plans for its stores. A smaller prototype in Richfield, Minn., with a cleaner layout and a central "solutions" desk where customers can talk to staffers, has shown improved results since it was revamped. The company said it doesn't plan any specific store closures but will rethink store sizes in many areas.
Best Buy shares fell 15 cents to close at $15.70.