Best Buy Profit Climbs on CEO Joly's Cost Cuts

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Aug. 20 (Bloomberg) -- Bloomberg's Scarlet Fu examines the success of Best Buy CEO Hubert Joly as the electronics retailer posted its largest profit gain in more than two years following strategic cost cuts. She speaks on Bloomberg Television's "Bloomberg Surveillance."

This is "bloomberg surveillance." our guest for the outdoor, richard -- our guest for the hour, richard haass.

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You have been told?

You have never been there.

Scarlet fu is in earnings mode.

I am trying to look for the last time best buy shares were this high because right now the premarket is up 12%, 3437. it looks like i have to go back to 2011 for the last time best buy was in the $34 range.

Huber jolie, last year -- with all the beating up of ceo's we do, this guy gets a trophy.

A major victory.

Not long ago there were a lot of questions over whether best buy should be taken private by the founder.

This is an example of a company that stayed public, got a ceo from outside, came up with a strategy, stuck to its business.

They embraced the show room concept and did it well.

Now profitability is increasing.

Margins increasing by 300 basis points.

Will anybody argue about his compensation?

I don't think so.

Certainly not shareholders.

It sounds to me like what you are saying is that profit margins are doing better because the whole idea was they were going to match the low price and sacrifice profits as a result.

They are seeing profitable -- they are still seeing profit sales fall, but they are going up whether it is earnings per share.

Moving on that experience.

You recently bought something at best buy.

I did.

I bought a garmin gps thing.

We have to go to somebody who just bought a 72 inch tv that takes up her entire room.

Alix steel.

You nailed all the good points of this.

Margins were much better than estimated.

This really was not that bad.

Invest -- best buy had said this was going to be a terrible quarter, really looking at the fourth quarter.

And you had sales, like scarlett pointed out, better than expected.

It seems like the u.s. growth markets were better -- u.s. gross margins were better.

It is where they are struggling, sales and margins.

Should i asked the elephant in the room question?

Why doesn't mr.

Bezos just buy best buy?

We have to see if huber jolie wants to sell best buy in that way.

They are trying to compete so aggressively with amazon, not only store to store but also ramping up customer service, which you don't get at amazon.

Best buy also has a small conversion rate of people going online and comparing shoppers to buyers.

They are trying to turn that around also, an online sales in the u.s. are up 10.5%. that is a small conversion rate, a low hanging fruit for them.

And you go into best buy now, what is the difference in the store?

You have the store within a store, a different layout.

The thing with samsung and microsoft, details are fuzzy.

It seems like samsung rents the space and pays for their workers, but the revenue split is where it gets confusing for analysts.

However, when you go in and see the store within a store, you get the personal service, and that is the difference that huber jolie has been trying to make.

Up until now, customers were not able to look at products side-by-side in one space, and this is what best buy has provided them.

The best buy edp and cfo making comments that they will continue to invest in the business, particularly when it comes to the initiative to streamline everything and continue to stay competitive with prices.

When they redid their stores, that is why they are saying there sales are down .6 of 1%. same-store sales would have been flat to slightly higher.

And samsung, apple, lg, sony, those sales make up 45% of best buy revenue.

Their fortunes are tied into these particular companies, and what they are able to promote.

Do they still have the geek squad?

They do, and they are trying to ramp it up.

You don't get that type of service elsewhere.

Alix steel with a rundown of the best buy turnaround, working out pretty nicely this morning.

Our twitter question of the day -- who has the toughest road of the day -- best buy, aren't noble, or jcpenney?

We will bring you the results shortly.

? this is "bloomberg surveillance." sara eisen with parliament -- with scarlet fu and tom keene.

Scarlet fu is here with other company news.

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The justice department is investigating whether the firm manipulated u.s. energy markets, according to "the wall street journal."

This text has been automatically generated. It may not be 100% accurate.


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