Blessed are the Geeks for they want to repair your gadgets.
The Geek Squad, Best Buy's (BBY) band of merry fix-it fanatics, is marking its 30th anniversary this month.
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Founded June 16, 1994, the group provides services in-store, on-site and over the Internet, while also offering 24-hour telephone and emergency on-site support.
The Geeks took a hit in April when the electronics retailer laid off field agents, home-theater-repair technicians and phone-support specialists, the Minneapolis Star-Tribune reported. The job cuts came amid a restructuring that included new uses for artificial intelligence, such as customer support.
Chief Executive Corie Barry, who had outlined a restructuring plan in February, told analysts during the company's first-quarter-earnings call last week that "we reduced the number of Geek Squad team members to align our head count to our forecasted demand."
"This will improve the experience for our remaining employees and allow them to rely on a more consistent schedule and pay," she said.
Barry said Best Buy was leveraging AI to route 95% of in-home delivery and installation trucks and using AI tools to improve the accuracy and efficiency of customer service calls.
Best Buy CEO: Consumers making 'tough choices'
Best Buy, which is hosting its annual meeting on June 12, reported first-quarter earnings of $1.20 a share, compared with $1.15 in the year-earlier quarter and beating Wall Street’s expectations of $1.08.
Net revenue totaled $8.85 billion, down from $9.47 billion a year earlier and short of analysts’ call for $8.96 billion.
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Barry said macro factors continue to fluctuate and pressure consumer spending, noting that "inflation is still high, mortgage rates are high, and consumer confidence scores are trending lower."
"Consumers continue to make tough choices with their budgets, trading down in some areas while still prioritizing spend in others like services and experiences like travel," she said.
This, along with the pull-forward of tech purchases into the early years of the pandemic and less material innovation, "has led to continued lower demand for higher-ticket consumer electronics and a focus on value and deals for current purchasers," she said.
During the quarter, the Richfield, Minn., retailer unveiled a partnership with Google Cloud (GOOG) and Accenture (ACN) involving Best Buy's customer-support framework.
Barry said the enhanced self-service support, which is expected to launch in late summer, will use a generative-AI-powered virtual assistant to help customers troubleshoot product issues, change their order delivery and scheduling, and manage their Geek Squad software subscriptions and membership.
Barry said Best Buy expected the computer category to benefit as early replacement and upgrade cycles gain momentum, "and new products featuring even more AI capabilities are released as we move through the year."
"We have seen early signs of improvement as year-over-year comparable sales for laptops turned slightly positive in the fourth quarter, and that trend continued in Q1," she said.
"Last week, Microsoft announced Copilot+, and laptops from Microsoft (MSFT) , Dell (DELL) , HP (HPQ) , Lenovo, and Samsung are available for preorder on our website right now and will be available on June 18," she added.
Analyst says earnings a 'thesis changer'
Citi analysts liked what they heard from Best Buy, as the firm double-upgraded the company's stock to buy from sell with a price target of $100, up from $67.
The investment firm said the company's catalyst path looks positive from here. It sees upside potential to earnings and valuation based on tech-replacement cycles that are under way; artificial intelligence innovation providing incremental demand, and margin execution remaining solid.
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The earnings report proved Best Buy's gross-margin execution remains best-in- class with company-specific drivers offsetting external pressures like higher promotional activity, Citi said.
The firm said the earnings report was a "thesis changer."
Meanwhile, Truist lowered its price target on Best Buy to $86 from $87 and affirmed a hold rating on the shares.
The first-quarter sales were a bit light compared with its estimates, Truist said. The investment firm expects some comparison acceleration through 2024 as the industry continues to cycle pandemic-related pull-forward demand.
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Truist also said macroeconomic pressures on discretionary goods will limit the rate of improvement at BBY.
The company's post-earnings stock-price rally was largely a function of depressed investor sentiment, reversing the pressure on the shares from the past six weeks, Truist added.
Evercore ISI raised its price target on Best Buy to $90 from $80 and kept an in-line (effectively neutral) rating on the shares.
Improved May sales and the mention of the start of a new AI-led laptop cycle "popped the stock" back to where it was in March, the firm said.
Following the earnings report, the investment firm bumped its 2024 earnings-per-share estimate to $6.10 while 2025 is unchanged at $6.40.
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