Best Buy's efforts to revive sales growth include capitalizing on the AI trend.

• On Tuesday, Best Buy introduced its plan to regain sales growth by assigning staff to crucial store sections, producing more enticing videos, and launching a new advertising campaign.
• The retailer aims to capitalize on the anticipated replacement cycle of pandemic-era purchases and the new wave of innovation in consumer electronics.
• In a CNBC interview, CEO Corie Barry stated the company's focus on "reclaiming that 'new' element."

The company announced new plans on Tuesday to reverse a two-year sales slump and capitalize on the anticipated replacement cycle of pandemic-era purchases and a wave of new innovation.

The retailer announced plans to enhance its customer experience by deploying trained sales teams in select stores, increasing its YouTube content to spark interest, and launching a new marketing campaign with the tagline "Imagine that."

In a CNBC interview, Best Buy CEO Corie Barry stated that customers have expressed dissatisfaction with retailers' store experiences and technology offerings, stating that they have "lost a bit of their shine." She also mentioned that the consumer electronics industry is currently experiencing a dry spell in innovation.

"Our main emphasis this year, as she stated, is to restore the "new" element."

One of Best Buy's primary strategies for boosting sales is through the use of AI-powered laptops and smartphones.

Despite reporting 10 consecutive quarters of declining comparable sales, the retailer does not anticipate an immediate improvement in sales.

Best Buy anticipates revenue to fall between $41.3 billion and $42.6 billion, a decrease from $46.3 billion in the previous year. This range would place its revenue slightly below the $43.6 billion recorded in the pre-pandemic fiscal year that ended in early 2020.

Barry said consumers are still "making very clear, value-based decisions."

The stock of Best Buy has decreased by 36% from its peak value of $138, which it reached during the Covid pandemic, as of Monday's closing.

In early June, Steven Zaccone, an equity research analyst covering retail for Citi Research, upgraded Best Buy's stock from sell to buy, citing an anticipated influx of new products as a contributing factor.

He acknowledged that predicting trends has become more challenging due to the high inflation rates and the uncertainty surrounding this year's presidential election, which has caused consumers to be more cautious with their spending.

""The call is based on the hope that you'll have a pivot to growth, as those focused on the near term believe the category is still declining," he said."

Rooting for a replacement cycle

Best Buy's laptop sales have been increasing in the past two quarters, indicating a potential replacement and upgrade cycle.

During Amazon's two-day Prime event, U.S. retailers' websites recorded a record $14.2 billion in sales driven by shoppers' purchases of consumer electronics such as tablets, TVs, and Bluetooth speakers. This was a change from the previous year when shoppers, weary of inflation, took advantage of deals on household essentials. Best Buy is among the retailers that participated in the Amazon-created retail holiday by offering its own deals.

The success of Best Buy in increasing sales is largely dependent on its vendors. The company has been seeking innovative solutions to attract customers to its stores or website.

In recent months, Apple and Samsung have unveiled new products that could generate excitement and attract customers. Apple released a new line of iPads in May, while Samsung debuted its first "smart rings" with health-tracking capabilities to challenge Oura's ring and Apple's watch.

In May, Microsoft unveiled a range of new PCs featuring Copilot, an AI-powered chatbot. The collection, comprising approximately 40 items with around 40% exclusive to Best Buy, started shipping in mid-June.

As customers witness technological advancements in retail chains, stores will offer new lines of business, such as rings that monitor sleep and physical activity.

"Now, we're going to have a whole section of wellness-oriented products that you can wear in really unique ways, something we never would have considered five years ago," she stated.

Less tech specs, more discovery

Best Buy staff will now prioritize assisting customers in comprehending how products can simplify their lives or save them time, as per Barry's statement.

This summer, customers will encounter more experiential displays featuring Tesla chargers, GoPro video equipment, and Lovesac's furniture in stores. Additionally, dedicated teams will be added to support customers in the computing, appliance, and home theater sections, which are the areas where Barry stated customers typically require assistance.

Barry emphasized the importance of highlighting unique features of products that customers may not be aware of, such as a laptop with double the battery life, a washer/dryer combo that can handle two loads at once, and a home theater system that can transform a workout space into a spinning studio.

Customers can personalize their Best Buy app home screen, access a new "Discover" tab, and set alerts for sales on their wish list items.

The company aims to triple the number of videos it added last year by releasing over 500 videos on its YouTube channel, app, and website by the end of the year.

As the school year approaches, Best Buy will launch an advertising campaign featuring a "spokeshologram" named Gram.

Barry stated, "We are fully committed to emphasizing our uniqueness and I believe we are the only ones capable of addressing the 'What if?' question for our customers."

Best Buy is tightening its customer strategy on a smaller budget. According to Barry, the retailer plans to spend $750 million in capital expenditures this fiscal year, which is $50 million less than last year. Instead of investing in major remodels and new store openings, the company is focusing on refreshing its approximately 900 U.S. stores.

The company will have dedicated teams in some parts of the store, consisting of both its existing employees and those from its vendors, as per the CEO's statement to CNBC.

'Murphy's law of headwinds'

Scot Ciccarelli, an equity research analyst at Truist Securities, stated that Best Buy has experienced a "Murphy's law of headwinds" over the past three years, meaning that anything that could go wrong has gone wrong.

Consumers have reduced their spending on pricier items like smartphones due to rising everyday expenses such as food, gas, and rent. The slowing housing market, caused by higher interest rates, has decreased demand for home-related purchases like larger TVs and new kitchen appliances.

Best Buy's unusually high sales during the pandemic have disrupted the typical pattern of customers replacing their smartphones, laptops, home appliances, and more, as many of them bought that tech when setting up their home offices, gyms, and kitchens during the Covid lockdown.

During the pandemic, consumer electronics brands faced challenges with temporarily shuttered factories and clogged supply chains, resulting in less game-changing tech being debuted. As a result, Best Buy has been competing on price, selling roughly the same devices as competitors like Amazon and Walmart. If customers have little reason to touch or feel a product before buying, this has been particularly challenging for Best Buy, according to Ciccarelli.

Sales of consumer electronics have declined by 4% in dollars and 5% in units year to date compared to the previous year, as per Circana, a market research firm that tracks sales data across major U.S. retailers. This decline includes most major devices such as TVs, tablets, and audio equipment, but excludes some categories that Best Buy sells, such as home appliances.

This year, consumer electronics spending has increased by 5% compared to the pre-pandemic period in 2019, as per Circana's data.

According to Paul Gagnon, consumer technology industry advisor for Circana, some of the increase in sales comes from higher prices of computers, TVs, and other items. For instance, the average price spent on headphones has increased by 60% compared to 2019 as customers shifted towards wireless earbuds like Apple's Airpods or headband-style wireless headphones.

The second half of the year traditionally accounts for about 57% of consumer electronics sales, according to Circana data.

The peak days for consumer electronics are yet to come during the back-to-school and holiday seasons.