Best Buy’s spending comes at a cost

Best Buy's turnaround journey only gets harder from here.

The retailer, which is rolling out new offerings to grab more of its customers' spending, faces a suite of challenges. Those include tougher year-ago comparisons, the continued encroachment of Amazon.com and the cost of launching a new tech-support program.

The consumer spending boost fueled by the recent tax cuts also is likely to abate in the months ahead, muting shoppers' demand.

'While the tax benefits will remain for some time, they will likely become less pronounced as the year progresses - especially so, now that gas prices are on the rise,” Neil Saunders, GlobalData Retail managing director, said in a note to clients. 'Best Buy will need to continue evolving and adapting and must find new ways to serve the customer and drive sales.”

CEO Hubert Joly, now in his sixth year at the helm, is trying to stave off Amazon and capture additional revenue by pushing its brand deeper into Americans' homes.

This week, the company unveiled a 'total tech support” program that covers any gadget you own for $199 a year, and it's sending hundreds of salespeople out to do free in-home consultations, where they'll recommend everything from routers to refrigerators.

It also has partnered with Amazon to sell TVs powered by the internet giant's Fire operating system.

The company's expanded service push 'is a smart way of both serving and building relationships with consumers,” said Saunders of GlobalData Retail, noting that it could open up several new revenue streams for the retailer. Best Buy has said that it currently only captures 26 percent of its customers' technology spending, and wants to increase that share.

Target earlier this week reported that its profits also were hurt by new initiatives to drive online sales. Efforts by Target and Walmart to expand digital demand have resonated with customers but have taken a toll on the bottom line.