We acknowledge the steps Best Buy is taking to improve operational efficiency and find its current priorities--including online sales growth, improving the multichannel customer experience, optimizing the store square footage of its U.S. real estate portfolio, enhancing supply chain efficiencies, and cutting unnecessary costs--necessary to compete in an evolving consumer electronics retail market. We're encouraged by several moves over the past several years, including store-within-store partnerships with Amazon, Google, Samsung, Microsoft, and Sony; online fulfillment from existing distribution centers and stores; and shedding noncore SG&A costs. Best Buy's new service offering plans, like Total Tech Support and GreatCall, a connected-health services platform for seniors, are also intriguing. We also believe Best Buy's service offerings can benefit from a potential multiyear smart home product cycle and its ability to integrate devices from multiple manufacturers but may also face competition for in-home services talent and pricing pressure from rival installation and tech support offerings.
Despite solid top- and bottom-line momentum the past few years, we still believe competition and evolving industry dynamics eroded Best Buy's once narrow moat. In our view, online retailers, mass merchants, and direct sales activity from consumer electronics OEMs have diminished Best Buy's clout with consumers. Rivals still have competitive countermeasures at their disposal (price investments, membership program benefits, expedited shipping) while some key consumer electronics vendors increasingly take products directly to consumers and introduce trade-in programs to incentivize traffic at their own retail locations, raising questions about Best Buy's ability to profitably drive in-store and online traffic over time (providing the impetus for our outlook calling for operating margins to peak around 5% over the next several years). Relative valuation metrics appear punitive relative to industry and historical averages and recent capital returns to shareholders should continue to increase, but we believe investors should also weigh competitive and channel shift pressures.
As one of the world's leading consumer electronics specialty retailers, Best Buy would appear to be well positioned to capitalize on consumer demand for connected electronic devices. The company has delivered solid fundamentals the past several years due to operational improvements and attachment to favorable consumer electronics product cycles, but we believe online retailers, mass merchants, warehouse clubs, and vendors themselves have reshaped the economics behind the consumer electronics retail category, eroding the retailer's once-narrow moat (a rating we removed in 2009) and making market share gains more difficult. Although Best Buy possesses a recognizable brand name, advanced technical support and installation service offerings, and a management team better prepared for evolving consumer electronics retail industry changes, we're not convinced that it can fend off rivals without sacrificing margins.
Because of a heavy reliance on new product innovation and increasingly faster speed to commoditization, the consumer electronics retail industry is characterized by intense competition and minimal customer switching costs. As mass merchants and online retailers have enhanced their consumer electronic product assortments and OEMs built out their own retail and direct-to-consumer channels, suppliers have become less dependent on Best Buy for distribution, in our view. Although stores-within-stores and other partnerships with Google, Samsung, Microsoft, Sony, and Amazon (including the introduction of 10 Fire TV-enabled television models in 2018) indicate that consumer electronics OEMs still view Best Buy as a viable product distribution channel, we harbor longer-term concerns that these manufacturers will find ways to bypass the traditional retail direct-sales model and expand their own direct-to-consumer presence (including greater exclusivity for new product launches and trade-in plans like Apple's iPhone upgrade program), extracting a greater percentage of the economic profits from each consumer electronics transaction in the process.
Additionally, consumer electronic products are often differentiated by price alone, making industry heavyweights like Amazon and Walmart threats to Best Buy's market position. With consumer electronics likely to become more relevant to consumers over the next several years through connected home and other technology trends, we expect price competition to intensify, likely keeping Best Buy's margin expansion in check.
The consumer shift to researching and buying products online and digital distribution for media products has also driven down in-store transactions. We believe this will continue to have a long-lasting impact on store-level productivity and profitability, as this channel shift will result in a mix shift toward lower-margin hardware sales and drive lower sales attachment rates on higher-margin services, accessories, and warranties. As such, we're not surprised by management's commitment to optimizing the square footage of its traditional big-box format stores. Ultimately, we believe additional store closings or a move to smaller-format locations--even after factoring in the closure of all 257 Best Buy mobile stores in May/June 2018--and a more competitive online sales platform will be necessary to consistently deliver excess economic profits over a longer horizon.
Best Buy has developed dedicated smart home departments for all U.S. stores, with stores featuring services and personnel from private smart home service provider Vivint. We're also intrigued by the early success of GreatCall (a comprehensive technology solution to remotely check in on the health and safety of seniors), and Total Tech Support (an ongoing, unlimited tech support offering priced at $199 annually or $20 per month). On the surface, each of these initiatives makes sense given the expected growth of smart home devices (which we forecast to grow to $41 billion in the U.S. by 2020 from $33 billion in 2018 through a combination of increased consumer awareness/adoption and new product innovations according to estimates by Strategy Analytics), positive connected health and wellness trends (which management anticipates to grow to $48 billion in 2020 from $28 billion today), and Best Buy's ability to service and integrate across multiple devices and ecosystems.
However, as we've discussed in the past, we've seen many consumer electronics retailers attempt to stem off price competition by differentiating themselves through technical support or installation services over the past several decades--including Tweeter, Ultimate Electronics, and hhgregg--but with little long-term success. While we expect smart home products will require a greater level of service that exceeds the technical support or installation services from these defunct retailers because they encompass all rooms of the house, we believe that other players--including Amazon and Walmart--also see the opportunity that this category offers and are exploring ways to participate directly with their own service platforms, indirectly through partnerships with other service providers, or listings on their third-party marketplaces. Because of the availability of competing service offerings, consumers have historically shown reluctance to pay premiums for these services and gravitate to the lowest-cost provider, making margin expansion a difficult proposition. We forecast that services will account for 6.0% of domestic revenues in fiscal 2021--compared with 4.4% in fiscal 2019--adding roughly $700 million in incremental revenue.
From an operational standpoint, we're encouraged that Best Buy has reduced the average lease life of its stores by around three years since fiscal 2012, with the fleet now having average lease terms of five years. This gives the company greater flexibility to rationalize its store base or negotiate lease terms for existing locations and/or look for relocation potential given the evolving retail square footage environment and new formats that better accommodate the shift to a more service-oriented business model. We also like that the company is focused on improving its supply chain efficiency through warehouse automation, small-footprint fulfillment centers in denser markets, and new partnerships to expand fulfillment and delivery capabilities, which is almost as crucial as price and selection with respect to the consumer purchasing decision in today's environment. That said, these investments will weigh on margins not just the next several years--management anticipates between $750 million and $800 million in capital expenditures for fiscal 2020--but also a much longer horizon. With the ongoing operational and support costs behind these investments, we remain comfortable with our medium-term assumptions calling for operating margins in the 5% range (which is consistent with management's 2021 target).
Our fair value estimate is $62 per share, which implies fiscal 2021 (ending January 2021) price/adjusted earnings of 11 times, an enterprise value/EBITDA multiple of 6 times, and a free cash flow yield of 8%. Although the relative valuation metrics appear punitive to industry averages, we anticipate diminishing fundamentals during the latter part of our explicit forecast period.
We believe the company is poised to meet its fiscal 2020 targets, including $42.9 billion to $43.9 billion in revenue, enterprise comps of 0.5%-2.5%, flat enterprise operating margins of 4.6%, and adjusted EPS of $5.45-$5.65. Our confidence stems from ongoing consumer cycles in computing, wearables, smart home, and gaming hardware/software; in-home advisory and tech support plans; and gross margin and SG&A expense optimization plans. Tariffs are the key unknown for fiscal 2020, which may result in higher consumer prices and negatively effect higher-ticket product demand. However, new sales strategies such as lease-to-own, gross margin benefits from the continued sales shift to services, and other merchandize margin optimization efforts should be sufficient to drive results toward the high end (or slightly ahead in the case of EPS) of guidance for the year.
Our model assumes low-single-digit annual revenue growth the next five years--implying fiscal 2021 revenue between $44.0 billion and $44.5 billion--the result of 2% comps (aided by in-home advisors and total tech support offerings) but partly offset by store closures.
With respect to profitability, we expect a slight increase in adjusted gross margins (versus 23.2% in fiscal 2019) and a slight decline in SG&A to result in slight increase in adjusted operating margins in fiscal 2020 (4.8% versus 4.6%). We believe price competition across multiple channels (including services) will make adjusted operating margins greater than 5% difficult to sustain. Our model calls for operating margins to peak around 5% within the next five years, before tailing off in the latter part of our explicit forecast period.
We believe Best Buy's management team has developed several sensible initiatives to optimize its cost structure and improve relevancy among consumers. However, the consumer electronics category is inherently challenging due to a reliance on continuous product innovation, a rapid speed to commoditization, and intense price competition (particularly in later stages of electronics product cycles). Even with management's square footage redesign efforts, customer-facing improvements in stores and online, a more efficient targeted marketing plan, chainwide ship-from-store capabilities in the U.S., and new in-store and in-home service platform enhancements, we believe consumers' ongoing migration to the online channel and digital distribution of entertainment software will negatively affect unit-level returns for many of Best Buy's existing locations.
We view several efficiency and cost-cutting components of Best Buy's turnaround efforts constructively, including incremental operating income benefit from retail space redesigns, cost of goods sold and supply chain optimization initiatives, and reductions in corporate selling, general, and administrative expenses. However, we also view the online and in-store traffic components of Best Buy's future plans as more challenging, given Amazon's e-commerce leadership (which we believe generated around $100 billion in media and electronics and other general merchandize category revenue in North America during calendar 2018, compared with $6.5 billion in domestic online sales for Best Buy) and other competitive countermeasures from rivals (including price matching, locking in consumers through membership programs, and expedited fulfillment capabilities). In our view, this will make it difficult for Best Buy to reach and sustain longer-term operating margins greater than 5%.
We've maintained our Standard equity stewardship rating following the transition of CEO Hubert Joly to executive chairman, the appointment of CFO and strategic transformation officer Corie Barry to CEO, and the promotion of U.S. chief operating officer Mike Mohan to company president and COO in June. Since joining the company in 2012, Joly has been the architect behind many of the retailer's initiatives, including enhancing its multichannel customer experience, store-within-store partnerships, optimizing its U.S. real estate portfolio, and enhancing supply chain efficiencies. We also consider Joly's decision to divest its share of the Best Buy Europe joint venture and its Five Star operations in China as well as the consolidation of the Future Shop brand in Canada--each of which had historically weighed on consolidated cash flow--as positive steps that allowed management to dedicate incremental resources on improving the retailers' core North American operations. However, in more recent years, Barry has taken on a more active role with Best Buy, particularly service offerings like Total Tech Support and GreatCall, and we believe the company will continue to explore new service-based partnerships under her leadership. With Joly moving to executive chairman and supporting Barry on "key matters, such as strategy, capability building, M&A, and external relationships," we expect the transition to be seamless. Although we harbor some concerns about Best Buy's past executive compensation levels, we believe management's swift and decisive cost-containment efforts are enough to warrant a Standard stewardship rating.
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