I don't think it's a coincidence that consumer-electronics giant (and Motley Fool Stock Advisor recommendation) Best Buy
With tongue planted firmly in cheek, Best Buy advertises its Geek Squad as "an elite tactical unit of highly trained and highly mobile individuals who seek out and destroy villainous computer activity. These individuals have banded together and have sworn to rid the earth of inferior computer behavior." Able to consult with each other as they work, thanks to a communication system that Sprint has devised for them, the Geeks function much like the Borg, assimilating all computer resistance as they go. ("You may be harboring a fugitive computer," they warn. "You may experience nausea, headaches, and sweating. If you are suspicious, immediately call the Geek Squad.")
Of course, there's nothing wrong with mixing wry humor with market analysis. (Gee, remind you of a certain investment website?) But will investors be laughing all the way to the bank with Best Buy? The company itself certainly hopes so, and it has included the Geek Squad service as one of several critical initiatives for increasing its annual operating income rate to 7% of revenue for fiscal 2008. Best Buy even plans to open 20 to 50 stand-alone Geek Squad stores in the next year to year-and-a-half.
Another initiative is the continuing conversion of all Best Buy stores to what the company calls "the customer-centricity model," whereby individual stores focus on one or two key customer segments -- from "affluent professional males" to "upscale suburban moms."
Best Buy's lighthearted focus on expanded customer service does seem to be paying off in critical ways already. According to the company's latest performance reports, revenues were up by 12% for fiscal 2005. And even more significantly, same-store sales at the "customer-centricity" stores, for the time frame in fiscal 2005 during which they were open, increased 8.2%, compared with a gain of 1.9% for the not-yet-converted stores for the same time period. Earnings from continuing operations were up 17% to $934 million, or $2.79 per diluted share. The new-style stores were more expensive to run, however. The selling, general, and administrative (SG&A) expenses were higher for the newly converted "customer-centricity" stores, resulting in a lower operating income rate than the non-converted stores had.
The financials are very sound overall, especially to the investor who believes that serving customers exceptionally will be more profitable in the long run than simply pushing product out the door. And how can you resist a company that describes its payment terms thusly: "We accept cash, check, and most major credit cards. (While it has no monetary value, we also welcome dating advice.)"?
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Fool contributor Ellen Dowling owns no shares of Best Buy, but she welcomes any geek-related questions or comments.