Best Buy Co., Inc. · NYSE:BBY
Best Buy — Investor Day (September 2019)
109 slides from Best Buy's investor day presentation, Sep 25, 2019
Slide 1: Let's talk about what's possible
Let’s talk about what’s possible. September 25, 2019
Slide 2: Non-GAAP and forward-looking statements
This presentation includes non-GAAP financial measures, such as non-GAAP operating income, non-GAAP diluted earnings per share (“EPS”), non-GAAP return on investment (“ROI”) and free cash flow. These non-GAAP financial measures are provided to facilitate meaningful year-over-year comparisons, but sh
Slide 3: Presenters
ie} Corie Barry 5 Mike Mohan Ba Rob Bass , eX Asheesh Saksena fo Matt Bilunas " Fe
Slide 4: Welcome and strategic overview
Welcome and strategic overview Corie Driving business outcomes Mike Best Buy Health Asheesh Supply chain Rob Financial discussion Matt 15-minute break d Q&A BEST BUY,
Slide 5: Let's talk about what's possible: Chief Executive Officer
Let’s talk about what’s possible: Chief Executive Officer BEST BUY,
Slide 6: There are four thoughts we want you to leave with today
There are four thoughts we want you to leave with today: Our strategy is the right one, and it is working Delivered well, our strategy will unlock profitable growth We have tangible examples of how our strategy is coming to life for our customers We have set aggressive but achievable targets ‘0000
Slide 7: We have nearly reached our financial goals, two years ahead of plan
We have nearly reached our financial goals, two years ahead of plan. $43.0B 2.2% 4-year CAGR Revenue $39.4B Non-GAAP $1.7B $1.9-$2.0B operating 5 5 ; income 4.4% rate 4.4%-4.6% rate $3.51 $5.50-$5.75 Non-GAAP diluted EPS 8% 12%-13% ms 4-year CAGR 4-year CAGR
Slide 8: Strategic progress over the past two years
And we have accomplished much toward our strategic progress over the past two years.
Slide 9: This reinforces our investment thesis
This reinforces our investment thesis.
Slide 10: Therefore, we have set aggressive goals
Therefore, we have set aggressive goals. Be one of the best companies to work for in the U.S. * Place on Fortune’s 100 Best Companies to Work For * Increase employee engagement ¢ Enhance leadership development * Promote diversity and inclusion ¢ Advance training and recognition FY25 GOALS Double sig
Slide 11: Introducing Building the New Blue: Chapter Two
Introducing Building the New Blue: Chapter Two. BEST BUY —_20207_ BLUE a
Slide 12: Our view of the environment: services build deeper relationships
Our view of the environment reinforces our confidence in our strategic goals. We have a suite of services that can build deeper customer relationships at scale
Slide 13: The CE industry is more stable than often perceived
Our view of the environment reinforces our confidence in our strategic goals. The CE industry is more stable than often perceived
Slide 14: The traditional CE category is steadily growing
The traditional CE category is steadily growing. Personal consumption ($ Billion) 1,200 1,100 1,000 900 800 == Groceries 700 Auto 600 —— CE, appliances & services 500 = Clothing & footwear Education 400 ee Furniture 300 a Economic slowdown 200 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2
Slide 15: At the category level, CE is as stable as durable goods
At the category level, CE is as stable as durable goods. Small, electric household appliances Major household appliances Televisions Photographic equipment Personal computers/tablets and peripheral equipment Telephone and related communication equipment
Slide 16: Technology innovation continues to ramp up
Our view of the environment reinforces our confidence in our strategic goals. Technology innovation continues to ramp up BEST BUYs 16
Slide 17: Innovation continues to be prolific
Innovation continues to be prolific.
Slide 18: Of the top global R&D spenders, more than half are in CE
Of the top 10 Global R&D expenditure companies, more than half are in the CE business. - PwC, 2018 Global Innovation 1000 study
Slide 19: 50% of consumers are overwhelmed by technology
5O% of consumers are overwhelmed by technology
Slide 20: We understand what customers need and can address it
Our view of the environment reinforces our confidence in our strategic goals. We have a deep understanding of what customers need and have the unique ability to address their needs
Slide 21: We are the market share leader with room to grow
We are the market share leader with significant scale and room to grow. 59% Share position #1-5
Slide 22: Our customers love us when we help them
Our customers love us when we help them. 61% 2 Fd e e
Slide 23: We lead in differentiated advice, support and services
We lead the industry in being recognized for our differentiated advice, support and services. 0 Industry leader in providing expert and unbiased advice Improvement in the shopping experience across stores, online, mobile and app 3) Leading the competitive set on providing support and services
Slide 24: Significant relationships build brand love and higher revenue
Done well, significant relationships build brand love and higher revenue.over “——> Sh People who love the brand spend 1.5X the average customer Source: Best Buy and Marketing Evolution Brand Health Study & Sales Linkage Analysis, 2017-2019, represents a rolling 18-month period 24
Slide 25: A suite of services that builds deeper customer relationships
Our view of the environment reinforces our confidence in our strategic goals. We have a suite of services that can build deeper customer relationships at scale BEST BUYs 25
Slide 26: Our definition of services spans the shopping journey
Our definition of services spans the customer’s entire technology shopping journey. —=—lir?>ZH OO O | Delivery & installation* Repair services* Extended warranty* Total Tech Support* GreatCall’s concierge service*
Slide 27: Building the New Blue
Building the New Blue
Slide 28: Our purpose remains the same
Our purpose remains the same. To enrich lives through technology
Slide 29: Our strategy leverages tech and touch
Our strategy leverages our unique combination of tech and touch.
Slide 30: We are focused on meeting everyday needs
We are focused on uniquely meeting everyday needs. f ‘———— = ee Communication and Order and security in Fun, relaxation and Mental, physicalandspiritual | Caregivingand support Self-worth, self-identity, interaction with others everyday life for household enjoymentinlife healthand balance for depend
Slide 31: Fully addressing needs expands our addressable market
Fully addressing needs expands our addressable market.
Slide 32: Moving past selling health products to helping seniors age at home
An example of this is moving past selling health products to helping seniors age in their homes.
Slide 33: Our strategy will unlock profitable growth
We are confident our strategy will unlock profitable growth. Better serve existing | Capturenew demand customers Capture more of existing Enter new spaces Build capabilities Get new customers to Add new products and while maintaining transact with Best Buy lines of business profitability over time B
Slide 34: President and Chief Operating Officer
Let’s talk about what’s possible: President and Chief Operating Officer
Slide 35: Our strategy will unlock profitable growth
We are confident our strategy will unlock profitable growth. Tae avr cies Capturenewdemand Enternewspaces Build capabilities customers Get new customers to Add new products and while maintaining Capture more of existing JRUEWSEemUiUmsicast yy lines of business pro’ ity over time customers’ spend Bal
Slide 36: We have achieved true multichannel status
We have achieved true multichannel status. of online sales are picked up in stores All stores _ shipping online orders PC-related 2.8 services performed annually _—) with Geek Squad a Remote Support [r=
Slide 37: We have enhanced customer experience design capabilities
We have enhanced our customer experience design capabilities. Our customer experience research found: Customers love having us in their homes It can be difficult to navigate our multiple offerings Asaresult: It has been more difficult to build significant relationships
Slide 38: Store, online, home and services businesses
BEST BUY, Store Online Home Services business business business business BEST BUY,
Slide 39: A model that customizes interactions by market
... toa model that allows us to customize interactions by market. Today
Slide 40: Empowering our market teams
One way we are doing this is by empowering our market teams. Today Positive impact
Slide 41: Our scale wins at the market level
Our scale wins at the market level. Customer traffic Sales expertise National support In-home capabilities Vendor relationships Product fulfillment
Slide 42: Analytics uncover market-specific growth opportunities
Analytics uncover market-specific growth opportunities. PCE growth: 4.5% PCE growth: 4.2% ($) Best Buy revenue: Best Buy revenue: ye 3.0% 0.2% Growth Market opportunity: Market opportunity: Fulfillment In-Home Advisors Accelerate and digital presence growth
Slide 43: Our stores are vital to our market approach
Our stores are vital to our market approach. Space challenges for customer . . Evolve points of presence in most experience propositions d rk alitnah dependent on store personnel ISS DUETS Elna INSETS USE p p of technology e.g., fulfillment Flexible and more cost effective floorplans showcase new te
Slide 44: Winning the home is also key to our strategy
Slide 45: The cornerstone of the in-home experience is our people
The cornerstone of the in-home experience is our people. im" | 3 a ] In-Home Advisors . | eee aw Geek Squad Agents System Designers
Slide 46: Customers are more engaged after an In-Home Consultation
The customer is more engaged with Best Buy when they have had an In-Home Consultation. 1 NPS? is 1,750bps higher than our average customer Spend more than similar customers who purchased same product without an In-Home Advisor
Slide 47: Investing in technology to clientele at scale
We will continue to invest in technology to “clientele” at scale. Manual processes, employee-driven, store has to process sale Customer information leveraged for personalized marketing Customer-driven online consultation scheduling, mobile point of sale Professional advisor enabled, customer relatio
Slide 48: Human-centered design to enhance the proposal process
For example, we are leveraging human-centered design to enhance the proposal process. Your In-Home Consultation Let's make your tech dreams a reality. "$7,499.39 $7,499.39 $3,803.95 $1,555.52 $3,803.95 $1,585.52
Slide 49: Digital tools help advisors spend more time with customers
And new digital tools help advisors spend more time with customers and less time transacting. Looking for outdoor audio in the spri.. image jpg Looking for multiple speakers and sono. inne 8/12/2019 4:36 AM New Pergola Outdoor TV 55" Ceiling mount with turn image.jpg imagejpg Amanda's New Kitchen 8/
Slide 50: Building significant relationships through Total Tech Support
Another way we are building significant relationships is through Total Tech Support.
Slide 51: Customer feedback is excellent
Customer feedback is excellent. Total Tech Support Support for all the tech under r roof. 4.6 Customer rating KKKKS
Slide 52: Total Tech Support memberships are increasing quickly
Total Tech Support memberships are increasing quickly.
Slide 53: Building on early success with more benefits and features
We will build on early success, delivering more benefits and features to engage our members. Enhanced and More relevant and Increased Better integration premium features personalized self-service with members’ communications capabilities existing technology More to come
Slide 54: Millions of engaged My Best Buy members, too many offerings
We have millions of engaged My Best Buy members but a history of too many offerings. my = oe D : gy BEST (=) og @® J _ BEST BUY ance, WEDDING REGISTRY BU WISH LIST ; ry)\ =S] 7 BL The central feature of the program is the ability to earn certificates based on spend @ EASY ; Enables personalization i
Slide 55: We will evolve customer memberships
We will evolve customer memberships. Dozens of independent Integrated paid and free offerings offerings Membership economics managed holistically, at the customer level Economics of offers managed independently of each other
Slide 56: Our strategy will unlock profitable growth
We are confident our strategy will unlock profitable growth. Betterserve existing [e)(ieecucucle Enternewspaces Build capabilities customers Get new customers to Add new products and while ceEUN eS CAL) CHUCKS Sihemee transact with Best Buy lines of business profitability over time Balance investmen
Slide 57: Capturing demand by attracting new customers
We will capture demand by attracting new customers. Gg @ HomedAdvisor amazon Authorized Service Provider
Slide 58: Lease-to-Own provides another way to build a relationship
Lease-to-Own provides another way for customers to have a relationship with us. Enables purchase for those unable to obtain the My Best Buy credit card Provides solution for those who do not want a credit card
Slide 59: Early feedback from customers is encouraging
Early feedback from customers is encouraging. 92% 80% 715% “The application process was easy and the terms are very flexible. The option to pay off within 90 days for me is one of the best parts.” “lL ran over my MacBook Pro and didn’t have the money to purchase a new one. It’s made my life much bet
Slide 60: Lease-to-Own customers skew younger
Lease-to-Own customers skew to younger generations and the product mix is diverse. omer All other categories
Slide 61: We expect the program to build over time
We expect the program to build over time as part of our broader purchasing options. Launched in 36 states in March 2019, nine more states in October Coming to BestBuy.com in 2020 Continuing to improve customer experience at point-of-sale
Slide 62: Four key takeaways on serving customers and capturing demand
Here are four key takeaways from our strategy to better serve existing customers and capture new demand. Our new operating model will leverage deeper analytics and our unique assets to increase brand love and grow significant relationships at all touchpoints with our customers at a market level Winn
Slide 63: Our strategy will unlock profitable growth
We are confident our strategy will unlock profitable growth. Enter new spaces Build capabilities while maintaining profitability over time Better serve existing | Capture new demand customers Get new customers to Add new products and Capture more of existing transact with Best Buy lines of business
Slide 64: President, Best Buy Health
Let’s talk about what’s possible: President, Best Buy Health BEST BUY,
Slide 65: We will address these key questions today
We will address these key questions today. Who is our customer and what problem do we seek to address? How large and significant is that problem? How are we addressing that problem? Why are we uniquely qualified to do that? How far along are we in this pursuit? How large could this get? What would i
Slide 66: Managing health addresses essential, everyday needs
Managing health addresses essential, everyday needs. Communication and Order and security in Fun, relaxation and interaction with others everyday life for my enjoymentin life household and reassurance about the future Mental, physical, and spiritual health and balance Caregiving and support for depe
Slide 67: First step: bringing the best health tech to market
The first step in our health strategy starts with bringing the best health tech to market. ~_ )greatcall 214 NOW” MEDICAL : GUARDIAN Qtifignl+ 8 UNI NUHEARA Wee ESTAR SMARTBURNER™ Zvox @} Joy for All SOUNDWEAR LifeAssist Technologies morpoc presject Safety® nursery nanit babybrezza Hatch Baby Gao of
Slide 68: Healthcare is going through a structural transformation
The healthcare industry is going through a structural transformation that is unlocking new possibilities. Emergence of Sharply aging Changing business Steadily home as care site population model changing mindset 10,000 people turn 65 every day Two out of three seniors live with two or more chronic c
Slide 69: Helping seniors live longer in their own homes
We enable seniors to live longer in their own homes with the help of technology and support. . Source: ‘The Demographics Research Group, from the Weldon Cooper Center for Public Service, at the Unive
Slide 70: Our strategy builds the business in measured steps
Our strategy builds this business in measured steps, aligning capabilities with opportunities. Add care coordination services as a standard benefit within insurance plans Scale remote monitoring- based solutions Curate and sell health tech Human health needs Channels to reach
Slide 71: Our strategy needed an infusion of capabilities
Our strategy needed an infusion of capabilities. Best Buy had: Healthcare-specific talent Experience serving seniors Monitoring platform and predictive algorithms Market access into commercial health sector Base of business to build from
Slide 72: Acquisitions that added capabilities needed to scale
This led to important acquisitions that added capabilities needed to scale. (>) greatcall. Provides everyday support and solutions to seniors for no charge, paid for by insurance companies Es Roughly 100K seniors served on behalf of leading insurers, providers and senior living facilities Select lar
Slide 73: Unlocking the next step in our strategy
Armed with the capabilities we needed, we started to unlock the next step in our strategy. Add care coordination services as a standard benefit within insurance plans Curate and sell health tech Human health needs fa o——_—_—_—————___ Channelsto reach
Slide 74: Remote monitoring provides insights on daily living
Remote monitoring is a vital technology that provides meaningful insights on daily living.
Slide 75: Market potential for remote monitoring-based solutions
The market potential for remote monitoring-based solutions is significant. Our monitoring-based solutions can deliver 16%-25% savings in cost to serve frail seniors With $55B spend, this savings is sizeable for insurance companies We charge a monthly recurring fee, per senior, to insurance companies
Slide 76: Adding services to help seniors age at home
With core capabilities now in place, we have started adding additional services to help seniors age at home. —— Scale remote monitoring- based solutions Curate and sell health tech Human health needs Channels to reach ————————
Slide 77: Coordinating care across the everyday needs of seniors
Coordinating care across the everyday needs of seniors is vital and we have begun to address this imperative. Coordinating care across these “social determinants of health” is a growing need that CST supports Anthem, Centene and Molina already offer one of our services as a plan benefit We charge in
Slide 78: Goal: serve 5 million seniors in 5 years
Slide 79: Our strategy will unlock profitable growth
We are confident our strategy will unlock profitable growth. Enter new spaces Add new products and Better serve existing | Capturenew demand CUSSTES Get new customers to Capture more of existing transact with Best Buy lines of business customers’ spend Build capabilities while maintaining profitabil
Slide 80: Chief Supply Chain Officer
Let’s talk about what’s possible: Chief Supply Chain Officer
Slide 81: We have many reasons to transform our supply chain
Slide 82: • • • • • • • • •
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Slide 83: • • • • • • • • • • • •
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Slide 84: Our transformation leverages tech and touch
Slide 85: We are getting faster and better
Slide 86: • • o o o o
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Slide 87: Matt Bilunas, Chief Financial Officer
Slide 88: We are confident our strategy will unlock profitable growth
Slide 89: Improving ROI while increasing capital spend
Slide 90: Balancing investments with future cost savings
Slide 91: We will continue to invest in our people
Slide 92: Technology investments will accelerate business outcomes
Slide 93: Investing in retail fundamentals, pricing and promotions
Slide 94: Balancing investments with future cost savings
Slide 95: We have a proven cost-reduction track record
Slide 96: • • • • •
• • • • •
Slide 97: Financial discussion
Slide 98: We have a strong track record of delivering results
Slide 99: Our outlook for FY20 follows a similar trend
Slide 100: We generate consistent, strong free cash flow
Slide 101: Our capital allocation strategy is unchanged
Slide 102: We have returned significant capital to investors
Slide 103: Our FY25 financial targets
Slide 104: Conclusion
Slide 105: • • • • • • • • • • • •
• • • • • • • • • • • •
Slide 106: Here are the four thoughts we want you to leave with today
Slide 107: Best Buy Co., Inc. Non-GAAP Reconciliation
Best Buy Co., Inc. Non-GAAP Reconciliation ($ in millions, except per share amounts) (Unaudited and subject to reclassification) The following information provides reconciliations of the most comparable financial measures calculated and presented in accordance with accounting principles generally ac
Slide 108: Best Buy Co., Inc. Non-GAAP Reconciliation
Best Buy Co., Inc. Non-GAAP Reconciliation ($ in millions, except per share amounts) (Unaudited and subject to reclassification) The tables below provide calculations of return on total assets ("ROA") (GAAP financial measure) and non-GAAP return on investment (“ROI”) (non-GAAP financial measure) for
Slide 109: Best Buy Co., Inc. Non-GAAP Reconciliation
Best Buy Co., Inc. Non-GAAP Reconciliation ($ in millions, except per share amounts) (Unaudited and subject to reclassification) The table below provides a reconciliation of cash provided by operating activities from total operations (GAAP financial measure) to free cash flow from total operations (