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Retail Supply Chain: Best Buy Continues to Soar

Filed in archive News by ehsan on April 03, 2006

Retail Supply Chain: Best Buy Continues to Soar
Well, I'm back. As the first post after the trip, I found this one intersting:

The News: SCDigest reported that Electronics retailer Best Buy reported another quarter of strong financial results this morning, citing supply chain-related efforts as a key element of that performance. Still, there are reports CEO Brad Anderson thinks costs are rising too quickly and has ordered a broad-based effort to rein in hundreds of millions in costs.

The Impact: Some analysts have questioned whether the cost reductions will slow or hamper the "Customer Centricity" program Best Buy has been rolling out across its retail network.

The Story: Minneapolislinks-based electronics retail giant Best Buy reported outstanding financial results for the fourth quarter this morning, with earnings from continuing operations up 24%. The company predicted earnings growth of 20% for the next fiscal year, and cited several areas of supply chain performance as contributing strongly to those results.

At the same time, the Minneapolis Star Tribune reported this week that CEO Brad Anderson believes it's necessary to "trim some fat" - a lot of fat - from company operations, especially at the store level. The Star Tribune says this "could mark a fundamental shift in the way Best Buy does business, according to analysts and people inside the company," and has left some wondering if it will slow or constrain the chain's bold "Customer Centricity" program.

Commenting on the strong financial results, Best Buy said it stemmed in part from "progress in the company's supply chain transformation, improvements from price optimization, increase in private-label product sales, and better product transition management."

Best Buy has had a number of supply chain related initiatives, including improved visibility and supply chain event management, use of pricing optimization tools, and aggressive investigation of the potential for RFID in its supply chain.

Despite strong top line and earnings numbers, however, some Wall Street analysts have said the company is not doing enough to keep operating costs under control. In December, the company announced sales and administrative expenses rose 22 percent in the third quarter, double the company's revenue growth. Best Buy's stock fell 12 percent on this news.

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