Best Buy’s new CEO surprises investors with peculiar plan

Best Buy (BBY) has spent years trying to shake off a sales slump, and its next leader thinks part of the answer is smaller buildings.

Jason Bonfig, who becomes Best Buy’s sixth chief executive on November 1, told CNBC that he wants to open compact stores in towns and neighborhoods that its full-size locations never served.

The idea sounds peculiar for a company known for warehouse-sized showrooms, but Bonfig argues it opens doors that big-store costs have kept shut.

A traditional Best Buy needs enough nearby population and spending to cover the rent, staff, and inventory of a 40,000-square-foot store.

Smaller stores lower that bar, letting Best Buy enter towns too small to support the old model.

For shareholders in Best Buy, the plan lands at a delicate moment, with a leadership handoff underway and the stock climbing.

Why Best Buy’s incoming CEO wants smaller stores, not bigger ones

Bonfig’s plan starts with a simple problem. Many markets cannot support a 40,000-square-foot electronics store, so Best Buy skipped them entirely.

Smaller-format stores run about 12,000 to 15,000 square feet, compared with medium locations at 20,000 to 25,000 square feet, Bonfig told CNBC.

That lets the company reach customers it previously reached only online, if at all.

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This week the company opened two examples, one in Jonesboro, Arkansas, and one in Cape Cod, Massachusetts.

In Jonesboro, Best Buy is returning after a tornado destroyed its earlier location.

Bonfig was clear that smaller stores add to the fleet rather than replace it. He described them as an enhancement that extends the company’s reach into communities it had written off.

How the plan fits Bonfig’s push beyond electronics retail

The store idea sits inside a wider shift. Bonfig has said Best Buy is turning into a retail, media, advertising, and technology company rather than a pure electronics seller.

That means leaning harder on higher-margin businesses.

Best Buy Ads and the Best Buy Marketplace, which lets outside sellers list products, both drove growth in the most recent quarter.

The company is also deepening its work in AI. Best Buy is building shopping tools and pursuing partnerships with OpenAI and Google to help customers find and set up products, according to Retail Dive.

Bonfig has laid out four priorities for his tenure.

He wants to advance the retail, media, and technology mix, expand the company’s reach, elevate the store experience, and keep the culture people-focused.

Best Buy plans to open smaller-format stores in markets its big-box locations never reached.

Marvin Samuel Tolentino Pineda / Getty Images

What Best Buy’s recent numbers say about the turnaround

The strategy arrives after a quarter that beat expectations.

In the first quarter of fiscal 2027, Best Buy posted enterprise revenue of about$8.94 billion and adjusted earnings of $1.28 a share, according to the company’s SEC release.

Comparable sales rose 2%, the kind of growth Best Buy had struggled to produce for years. Gaming, computing, and mobile phones led the gains, while appliance sales stayed weak.

Best Buy kept its full-year outlook steady. Management still expects comparable sales in a range of down 1% to up 1%, and adjusted earnings of $6.30 to $6.60 a share, the SEC release shows.

Investors liked what they heard. Best Buy’s shares rose about 15% on the day of the report, helped by the strong quarter and Bonfig’s plans.

Where BBY stock stands now

Best Buy stock closed at $86.26 on July 31, down about 1.8% on the day but up more than 10% over the prior month, Google Finance data shows.

The stock trades at a price-to-earnings ratio near 16 and carries a dividend yield above 4.4%, with a quarterly payout of 96 cents a share.

For income-focused holders, that yield is a meaningful part of the case.

Here is how the recent run compares:

Best Buy stock and dividend snapshot

Recent price: $86.26, near the upper end of a 52-week range of $55.10 to $91.26
One-month change: up about 10.6%
Trailing P/E: about 16
Dividend yield: above 4.4%, or 96 cents a share each quarter

The gains show investors are giving Bonfig’s approach an early benefit of the doubt.

The bull case for Best Buy’s smaller-store bet

Supporters see a few clear advantages if the plan works.

Smaller stores cost less to build, stock, and run, which frees up capital. Pairing smaller buildings with higher-margin advertising and marketplace revenue could lift operating margins over time.

The format also unlocks suburban and rural markets that prior sizing kept off-limits. That widens the customer base without the expense of a traditional store.

Other retailers have tried out this method.

Target (TGT), Macy’s (M), and IKEA have all tested smaller footprints to reach shoppers in denser or underserved areas, giving Best Buy a template to follow, The Minnesota Star Tribune reported.

The risks investors should weigh before buying

Shifting from big-box logistics to a network of small stores can strain supply chains and leave shelves empty if inventory planning misses.

Thin retail margins and soft appliance demand also limit how quickly profits can grow.

The leadership picture adds another question. Bonfig takes over from Corie Barry during a stretch of executive change.

This includes the departure of CFO Matt Bilunas, who left at the end of July after seven years in the role, Best Buy noted. Best Buy is still searching for his replacement.

A finance chief vacancy during a strategy pivot means less continuity at exactly the moment investors want steady hands.

How to track whether the strategy is working

If you hold or plan to buy Best Buy stock through this transition, a few markers will show whether the plan is paying off.

Watch comparable sales first. The real test is whether small-format growth adds to results without pulling shoppers away from larger stores.

Track margins next. Smaller footprints should trim overhead. Also, advertising and marketplace revenue should keep expanding as a share of the total.

The next big checkpoint is the fiscal second-quarter earnings report, expected on August 27.

On report day, check for spending plans tied to the small stores and any update to the $6.30 to $6.60 full-year earnings target.

What the smaller-store plan means for Best Buy investors

Best Buy is asking investors to believe that a smaller store can drive growth, and the early numbers give the argument some support.

The strategy could lower costs and reach new customers while advertising and marketplace revenue lift margins.

It could also stumble if the smaller stores strain supply chains, margins stay thin, or the CFO search drags on.

For now, the stock’s climb suggests patience from shareholders. The August 27 earnings call and the first sales figures from the new small stores will show whether that patience is earned.