Best Buy Co. (BBY) - Get Report lifted its near-term forecast for operating earnings growth ahead of its investment day Wednesday as the electronics retailer looks to extend gains from stronger-than-expected second quarter earnings last month.
Best Buy said it sees a non-GAAP operating income growth rate of 5% by 2025, a figure that compares to its 2020 fiscal year forecast of a rate that is "flat to slightly up" from the 4.6% rate it recorded last year. The group said it also plans to cuts costs by another $1 billion, and sees a 2025 enterprise value for the Richfield, Minnesota-based electronics retailers of between $43.1 billion and $43.6 billion.
"Our Building the New Blue strategy is the right one, and it's working," said Barry CEO Corrie Barry. "We are excited about what we have accomplished so far, and we believe we will continue to enrich our customers' lives through technology and unlock profitable growth as we execute on the next chapter of this strategy."
Best Buy shares were marked 0.55% lower in the opening hours of trading Wednesday to change hands at $67.36 each, a move that would still leave the stock with a 27% year-to-date gain.
Reports also suggest newly-promoted CEO Barry is preparing to escalate the chain's growing push into healthcare and is now targeting the trillions spent by consumers on health items, with plans for health monitoring systems for seniors, fitness machines and other gadgets.
Best Buy's push into healthcare won a big endorsement earlier this week with analysts at Morgan Stanley arguing the retailer's plans could boost revenues anywhere from $11 billion to $46 billion over the next ten to twenty years.
Last month, Best Buy posted adjusted second quarter earnings of $1.08 per share on sales of around $9.55 billion. Barry also boosted the group's full-early earnings outlook to a range of $5.6 to $5.75 per share even as trade tariffs, and a slower mobile phone upgrade cycle continue to challenge the overall business.
"Best Buy has taken a number of decisive steps over the past three years, including closing underperforming segments and cutting costs, while investing to improve the customer's in-store and multichannel experience," KeyBanc Captial analyst Bradley Thomas wrote in a recent client note.
"However, the Company continues to face headwinds, including mixed
industry growth trends and meaningful competition. Best Buy continues to do an admirable job of executing what it can control, while returning cash to shareholders through its dividend
and share repurchase programs."