Best Buy Plans More ‘Geek Squads'27 Apr, 2005 By: Holly J. Wagner
Best Buy will open freestanding Geek Squad stores as part of its market expansion, the company announced today.
The company also announced a $1.5 billion share repurchase and its intention to open “lab” stores in China.
New projections from Best Buy indicate the company has more room to grow than previously thought, so executives revised up by 20 percent.
The company now plans to operate at least 1,200 superstores in North America, up from its prior plan of 1,000 superstores. The new total assumes 200 Canadian superstores under the Future Shop and Best Buy shingles, and approximately 1,000 U.S. Best Buy superstores.
Best Buy operates 838 stores in North America and typically opens 75 new stores per year in that footprint.
The company also plans to open 20 to 50 stand-alone Geek Squad stores in urban areas over the next 12 to 18 months. Geek Squad services are already available at all North American Best Buy stores.
The stand-alone stores, already open in three test markets, offer related software and accessories, including several private label products. The customer response to the stores, which measure approximately 1,500 square feet, has been very positive, and their financial performance has exceeded the company's expectations, according to a statement.
“We know that more consumers are storing their photos, music, home videos and games on their computers,” said Brad Anderson, vice chairman and CEO of Best Buy. “As their computer-based content becomes more important to them, so do the services that help them enjoy and protect that content. Moreover, we would like to claim for Geek Squad a position as the premier, national computer service provider, and we will be increasing our advertising of the brand this year. So far, the customer response has been terrific, and customer loyalty to Geek Squad is high.”
Best Buy will open and operate lab stores in China to accelerate learning about Chinese consumers. Consumer electronics and appliance sales in China are projected to grow by the strong double digits for the foreseeable future, a spokesperson said. The company already operates three sourcing offices in China (located in Shanghai, Beijing and Shenzhen) and has established relationships with manufacturers seeking to gain broader distribution in China and North America.
In light of the company's growth plans, the Board of Directors authorized the establishment of a $1.5 billion share repurchase program. The program terminates and replaces the company's prior authorization of $500 million announced June 24, 2004. During fiscal 2005, the company repurchased 3.9 million shares for $200 million. The company expects to begin purchasing its shares in the open market this quarter. There is no expiration date for the new share repurchase program.
“We believe we have significant opportunities for future growth. Yet most of those opportunities — such as opening new stores, converting our stores to the customer-centric operating model, strengthening our services offerings and exploring growth opportunities in new markets — have limited capital requirements, compared with our high cash flows,” CEO Anderson said.