Best Buy Co Inc is targeting an operating margin of 5 to 6 percent over time, the company said on Tuesday, as its new chief executive unveiled plans to turn around the world's largest consumer electronics chain.
The target is nearly triple what the company reported in the last fiscal year, and comes as Best Buy faces cutthroat competition from online and discount retailers like Wal-Mart Stores Inc and Amazon.com Inc .
Shares fell in afternoon trading, continuing a slide that has knocked off a third of the company's market capitalization this year.
"Many of these problems are a result of our own making," CEO Hubert Joly said at the outset of a long-awaited investor day where he was to lay out the new strategy.
In a statement ahead of the meeting, the company said its short-term goal will be "to stabilize and then begin increasing its comparable store sales and operating margin." Over time, it is aiming for a return on invested capital of 13 to 15 percent, in addition to the margin targets.
In the last fiscal year, Best Buy had an operating margin of about 2.1 percent. The last time that margin exceeded 5 percent was in the fiscal year that ended in early 2008.
The company has been struggling to combat a phenomenon known as "showrooming," where people come to its stores to look at products and then buy them online for less. Joly acknowledged the company has suffered from a "price perception issue" among customers that it needed to address.
Best Buy also said on Tuesday that it would pursue a plan to "optimize its store footprint on an ongoing basis," which suggested the company may look at ways to shrink or close stores, as some other big-box retailers have done. In late March the company said it would close 50 large U.S. stores.
Joly's long-awaited plan came roughly a week before the unofficial start of the year's biggest selling season, and two months after the turnaround specialist took the helm of the Richfield, Minnesota-based chain.
The meeting gives him a chance to woo investors and to distance the company from Richard Schulze - its founder, former CEO and largest shareholder - who is trying to take it private.
Joly has already made some structural changes. He eliminated the top layer of management at Best Buy's U.S. operations, and earlier this week named former Williams-Sonoma finance chief Sharon McCollam as the new CFO, hoping to tap her experience in developing a higher-margin e-commerce business and cutting costs by reducing square footage.
The retailer, which has posted declines in same-store sales in eight of the last nine quarters, warned last month it expected earnings and same-store sales to fall again in the third quarter.
Best Buy shares were down 1.3 percent at $15.64 on Tuesday afternoon. Last week the stock touched a ten-year low.
(Reporting by Dhanya Skariachan in New York; Writing by Ben Berkowitz; editing by Maureen Bavdek, Matthew Lewis and Phil Berlowitz)