Today Best Buy announced that it was officially freaking out about the current financial meltdown: “In 42 years of retailing, we’ve never seen such difficult times for the consumer,” Brian Dunn, president and chief operating officer of Best Buy, said in a statement. “People are making dramatic changes in how much they spend, and we’re not immune from those forces.” A Best Buy employee forwarded us an email that went out to all associates this morning — stressing that a renewed commitment to customer service was the way forward during these troubled times.
Best Buy says:
A Message from Brad Anderson, Brian Dunn and Bob Willett
To all employees:
This morning, we announced that we’ve seen a sudden change in consumer spending, in our comparable store sales, and in our expectations for this year’s earnings. We’d like to provide more context around these changes and their impact on our business.
The year started off well, with total company comparable store sales (sales at stores open more than 14 months) growing 4 percent for the first half of our fiscal year, a period that runs March through August. Our results were fairly consistent until September, when our comparable store sales turned negative, declining by 1 percent. Then our comparable store sales softened further in October, declining by nearly 8 percent, amid unprecedented changes in the financial markets, a deteriorating economy and weakening consumer sentiment. From where we stand today, we could see total company comparable store sales for the rest of the fiscal year decline by 5 percent to 15 percent.
Revenue gains are important to our business model because the majority of our costs ? such as rent and store operating costs ? are fixed. Typically, when comparable store sales increase by 3 percent or better, revenue growth outstrips expense growth (including merit increases, rising health care costs and the like), and our earnings rise. Currently, due to comparable store sales declines as well as spending increases, we have expenses rising faster than revenue. That’s why we’re now anticipating an earnings decrease for the year.
Specifically, today we also announced a new range for our earnings expectations: $2.30 to $2.90 per diluted share. The midpoint of our range is a 17-percent earnings decline compared with the $3.12 per share we earned last fiscal year.
Let us be very clear. These reduced earnings expectations reflect the unprecedented tumult in the financial services industry, which has reduced consumer spending across the board in retail. The outstanding work of our 165,000 employees doesn’t make us immune to our environment. We can’t change the overall level of consumer spending, but we can focus on deepening our relationships with customers wherever we interact with them: in our stores, on our Web sites and through our call centers.
While our comps have been negative, we gained market share in September and October. So we’re getting a bigger piece of a business that is currently shrinking. Customer satisfaction remains at all-time highs. Employee turnover is at historic lows. We firmly believe that our strategy of customer centricity is of great value in driving our performance versus the industry, and that’s the strategy we plan to pursue to continue to strengthen our position in the marketplace.
We must find ways to win with the customers who are coming to us today. Serving our customers better than anyone else is the best way to create value for customers, employees and shareholders alike. We need every employee engaged in serving customers better, and more efficiently. We want your unique perspective on what we should do differently in this market, based on what you see and touch, and using the talents you have.
We could let today’s turmoil distract us from serving customers. Other retailers might do that. But we will not. Instead, we will use these circumstances to redouble our efforts and deepen our commitment to each other, to our company, to our strategy and to the customers we serve. In so doing, we will strengthen and fortify ourselves as a team. A winning team. That’s who we are, and that’s Best Buy.
Brad Anderson, vice chairman and chief executive officer
Brian Dunn, president and chief operating officer
Bob Willett, chief executive officer of International and chief information officer