Product details

Product details
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Case
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Reference no. 9-506-055
Subject category: Marketing
Published by: Harvard Business Publishing
Originally published in: 2006
Version: 16 October 2006
Length: 29 pages
Data source: Field research

Abstract

With FY2005 sales of US$27.3 billion, Richfield, Minnesota-based Best Buy Co, Inc was the leading retailer of consumer electronics, home-office products, and related services in North America. Its operations included the distinct store formats Best Buy, Future Shop in Canada, and Magnolia Audio Video as well as service provider Geek Squad. For the eight years leading up to 2004, Best Buy had reported double-digit revenue growth every year and rarely missed earnings. But on 13 December 2005, Best Buy missed its third-quarter earnings per share (coming in at $0.28, not $0.30). The company's stock price fell nearly 12% that day, a loss of US$2 billion in market cap. The poor results were attributed to the aggressive rollout of 144 new 'centricity' stores - revamped retail formats featuring a customer-centric operating model designed to offer targeted 'value propositions' to one or two distinct customer segments. The new format was a departure from Best Buy's winning formula and required adjustments in interactions between various parts of the Best Buy organization, including a new set of segment leaders.
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Abstract

With FY2005 sales of US$27.3 billion, Richfield, Minnesota-based Best Buy Co, Inc was the leading retailer of consumer electronics, home-office products, and related services in North America. Its operations included the distinct store formats Best Buy, Future Shop in Canada, and Magnolia Audio Video as well as service provider Geek Squad. For the eight years leading up to 2004, Best Buy had reported double-digit revenue growth every year and rarely missed earnings. But on 13 December 2005, Best Buy missed its third-quarter earnings per share (coming in at $0.28, not $0.30). The company's stock price fell nearly 12% that day, a loss of US$2 billion in market cap. The poor results were attributed to the aggressive rollout of 144 new 'centricity' stores - revamped retail formats featuring a customer-centric operating model designed to offer targeted 'value propositions' to one or two distinct customer segments. The new format was a departure from Best Buy's winning formula and required adjustments in interactions between various parts of the Best Buy organization, including a new set of segment leaders.

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