Best Buy: gadget hawker chases the silver dollar

Best Buy is best known for hawking laptops, TVs and other consumer gadgets. But the electronic goods retailer has been boosting its push into healthcare services. It bought GreatCall, a maker of care devices for seniors for $800mn in 2018. Three years later, it paid $400mn for Current Health, a remote patient monitoring technology platform.

Best Buy is not the only retailer with healthcare ambitions. Walmart aims to build more than 75 medical centres in the US by the end of 2024. Dollar General is testing mobile health clinics outside some of its stores. Amazon, Walgreens and CVS have all made big acquisitions in patient care services. Healthcare spending — which reached $4.3tn, or nearly a fifth of US gross domestic product in 2021, has become too big to ignore.

Best Buy’s fledging health unit is focused on geriatric-care products and services. These include selling easy-to-use mobile phones and health-monitoring devices to seniors. It concedes the revenue contribution is very small and will take time to grow. But it needs to develop an alternative revenue stream to consumer electronics.

Sales at the company fell 10.5 per cent last year to $46.3bn as inflation-weary consumers cut back on discretionary spending. Net income fell by an even steeper 42 per cent. The stock, down a quarter over the past 12 months, trades on about 13 times forward earnings. That is in line with its three-year average but is at sharp discount to the S&P 500 retail index, which trades on 27 times.

Some will say Best Buy should focus on reviving its core business. But plenty of electronics retailers have gone bust (Circuit City and RadioShack come to mind). Best Buy can experiment. Its acquisitions have been small so far. While debt is not excessive, expected free cash flow will not cover dividends and share buyback programmes, according to S&P Capital IQ. But at least demographic trends are on its side.