- Best Buy’s investment in its healthcare segment is putting pressure on the business as sales fall.
- The retailer is building its healthcare business around in-home care with health-system customers.
- Best Buy Health’s president says the financial strain hasn’t changed the company’s strategy.
Even as sales slump, Best Buy is pouring more money into its healthcare business.
The electronics retailer slashed its revenue outlook for the year on May 24, as sales from its stores fell 8% over the last quarter. Despite the tightening margins, executives said the company is continuing to invest in Best Buy Health.
That strategy is putting pressure on Best Buy’s overall business, with the healthcare segment’s expenses swelling last quarter, said Matthew Bilunas, the company’s chief financial officer, during the May earnings call.
Best Buy is betting on the long-term profit potential of its healthcare segment despite the drop in store sales. The retailer has been pushing steadily into the industry since 2018, signaling its plan to settle into traditional healthcare, with its acquisition of remote-monitoring company, Current Health, in 2021.
Deborah DiSanzo, the president of Best Buy Health, told Insider the company won’t be decreasing that investment anytime soon.
“We’re staying on that plan, and Best Buy is extraordinarily supportive of the Best Buy Health business,” she said.
‘It seemed like a natural fit’
While Best Buy also sells consumer-health devices like fitness watches and blood-pressure monitors, Best Buy Health is staking its future on home healthcare.
The retailer acquired Current Health — which delivers a virtual-care platform and
devices to connect patients and providers — in November for $400 million.
In the past year, the company added 18 new hospital and health-system clients to Current Health’s business — signing on health systems like Mount Sinai and UMass Memorial Health — and bringing its client total to 40. Current Health pulled in $525 million in revenue in fiscal year 2022.
Best Buy also acquired GreatCall — now known as Lively — in 2018 for $800 million. The company announced last week that Lively’s urgent-response service for seniors will now be available on Amazon’s Alexa-enabled devices.
Best Buy Health directs most of its services toward older patients. The retailer has a team of people that helps customers pick out health devices and set up remote-monitoring technology in the home, tasks that DiSanzo said health systems have often had to handle for their patients.
DiSanzo said that Best Buy’s healthcare moves capitalize on the retailer’s strengths. Taking care of technology setup and logistics, she said, is the company’s bread and butter.
“Nurses don’t want to do that. Physicians don’t want to do that. And that’s what Best Buy does,” she said. “It seemed like a natural fit.”
Shifting the balance
Healthcare customers — including physicians, health systems, insurers, and pharmaceutical companies — only make up about 9% of Best Buy Health’s revenue. Consumers contribute the other 91%.
As the health segment digs deeper into traditional healthcare delivery, though, the company plans to shift that balance. Best Buy Health expects to increase the revenue contribution of its healthcare customers from 9% to 20% over the next five years, according to DiSanzo’s presentation to investors in March.
DiSanzo declined to share how much money Best Buy is investing in its health segment or how much Best Buy Health banked in revenue in the last quarter. Best Buy secured $11.6 billion in revenue across its segments in the same quarter.
Goldman Sachs analysts backed up Best Buy’s strategy to invest in its healthcare business in a note about the earnings on May 24. While analysts said the company faces challenges to its margins, they said Best Buy Health — among a few other initiatives — could help the retailer grow after those financial pressures ease.