NEW YORK _ Best Buy said this morning it expects to reach $50 billion in annual revenue in five years, up from its projections of between $43 and $44 billion this year.
While the focus will continue to be on growing sales, the company plans to increase its operating income rate through another $1 billion in cost reductions over that time as well as other initiatives,
The Minnesota-based retailer's top executives will discuss financial targets and growth strategy in more detail at an investor's meeting at the New York Stock Exchange later this morning.
The event will be the biggest stage thus far for CEO Corie Barry, who was named earlier this week to Fortune's list of the most powerful women in business. At 44, she was also one of the youngest leaders on the list of 50 women.
A Best Buy veteran of two decades, Barry quickly moved up the ranks and helped steer the company through its miraculous turnaround, and more recently, some of best sales growth in decades, under her predecessor, Hubert Joly. Joly handed the reins over to Barry in June.
Heading into today's meeting, some analysts have been especially excited about Best Buy's recent push into health services and related products. In the last year, the retailer, which had been acquisition-shy in recent years, has spent more than $1 billion, mostly to purchase GreatCall, which provides devices and monitoring services to help aging adults live in their homes longer on their own, as well as a couple smaller "tuck-in" acquisitions.
Health care is "shaping up to be Best Buy's next frontier of growth," Simeon Gutman, a Morgan Stanley analyst wrote in a 64-page research report that dropped earlier this week.
He estimated that health care could bring in $11 to $46 billion in potential revenue to Best Buy (currently a $43-billion company) over the long term. In the nearer term, it could add up to $500 million to $2 billion for Best Buy by 2025, which he noted was still attractive for retailers in this current environment.
Gutman said Best Buy's focus on the aging population is an "untapped white space opportunity" and added that potential competitors may find it daunting to match the services backed by the retailer's 20,000-strong Geek Squad.
Analysts also see potential for sales growth in some of Best Buy's other initiatives such as its in-home advisers that provide tech consultations, a new lease-to-own program rolling out across the country, and its Total Tech Support service which provides tech help no matter where you bought the products.
"The outlook for sustainable sales ... is perhaps better today than 2 years ago given internal operating initiatives," Peter Keith, an analyst with Piper Jaffray, wrote in a recent note to clients.
At the same time, the company's shares are currently being dragged down by concerns about tariffs, and some on Wall Street are concerned about how much Best Buy will have to spend on these initiatives in order to stay competitive, he said.
In addition to its new initiatives, Best Buy should also benefit from a rosier-than-usual outlook for consumer electronics, a relatively mature industry that tends to see fairly modest growth if any at all. Consumer electronics are expected to grow 3% in sales annually through 2021, driven in part by big-screen TVs, wireless headphones, and home automation devices, according to a recent forecast from the NPD Group
"Steady single-digit growth is notable in a mature market where consumers are not replacing or repurchasing items at the same rate they did in prior years," Stephen Baker, vice president of the NPD Group, said in a statement.
Most of the growth, he added, will come from people trading up on items and buying products with higher hprices as opposed to higher unit volume sales.
