Best Buy announces $1.7 billion loss, plans to close 50 stores and cut 400 jobs

Categories: Best Buy
best buy logo sq.jpg
Best Buy is taking it on the chin right now, but has plans to regroup and fight back.
The short-term outlook for Best Buy isn't good, but the world's largest consumer-electronics retailer is trying to position itself for long-term viability.

Today, the company announced a loss of $1.7 billion for the fiscal quarter ending March 3. Best Buy plans to close 50 stores in the U.S. by next year and cut costs by $800 million over the next several. 400 jobs will be lost in the process.

But Wall Street is apparently comfortable with Best Buy's long-term outlook, as the company's restructuring plan prompted its stock to rise by more than 4 percent in early trading.

In a statement following the company's 7 a.m. earnings announcement, CEO Brian Dunn said:
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CEO Dunn wants to steer Best Buy away from a big box-focused business model.
In order to help make technology work for every one of our customers and transform our business as the consumer electronics industry continues to evolve, we are taking major actions to improve our operating performance. As part of our multi-channel strategy, we intend to strengthen our portfolio of store formats and footprints -- closing some big box stores, modifying others to our enhanced Connected Store format, and adding Best Buy Mobile stand-alone locations -- all to provide a better shopping environment for our customers across multiple channels while increasing points of presence, and to improve performance and profitability.
In an analysis published before the earnings announcement, the Star Tribune's Tom Lee wrote that Best Buy is trying to lower prices in order to better compete with online retailers like Amazon. The hope is that lower prices will ultimately help the company gain market share, but in the meantime stores must be closed and jobs cut to pick up the slack.

In other words, the company's new strategy is one of those short-term pain, long-term gain things. Unless you work at one of the 50 stores marked for extinction over the next year or so. In that case, the silver lining is no doubt harder to find.

See also:
-- Best Buy: On the road to extinction?

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5 comments
Philip Wright
Philip Wright

I have been shopping at BBY since 1993.  I go to their stores about once a week.  I have noticed of late that there are much fewer people in the stores and there is no wow factor.  The company needs a new high growth area because Windows 8 and Quad are not going to do it and my lord, how much more can Apple and software pull work.  I dont know why a healthcare initiative has not been presented with a Nike hook-up.  Anyways, the biggest area of growth could be more geekacation and execution in the cable/pc/notebook/smartphone area.  When I get a geek person who knows what they are doing and helps me, it is like listening to an Angel play a harp and for the record, I am a supergeek.  I have carefully listened to customers at BBY's who are mostly older like me and have $$$  and they are frustrated as hell that they cant get the full productivity, benefits and joy from using all of these devices quickly.  Dont get me wrong, they really want to, but they dont know how to without feeling like they are stupid or dumb.  This is a great area for BBY to exploit.  My two cents worth. 

Kim
Kim

How can they possible close 50 stores and only lose 400 Jobs?8 jobs per store?

Fhundt
Fhundt

"Operating improvements" can't alter the fact that Best Buy stores have become boring sterile places where, should you decide to buy anything, you are barraged with extended warranty pitches.  Where is the fun, the sense of discovery and of play that we used to get shopping for consumer electronics?  If Best Buy could recapture that, they'd be much more competitive with both Wal-Mart and Amazon.

IoncelovedBESTBUY
IoncelovedBESTBUY

I believe the 400 jobs was only corporate positions. 50 stores has about 100 employee's, most will be allocated to other locations and the rest will probably be lay off and those numbers aren't calculated yet.  I worked for Best Buy for four years and they bought me out with an 8 weeks paid package because due to my departments performance in geeks and extended service numbers. 

Tadwagner
Tadwagner

I agree 100%. Customer Service has been steadily going downhill with that company for years. Its not unheard of for people to find an item of electronics that they want at Best Buy, and to order it at Micorcenter (with a 60 day return policy), or Amazon (generally cheaper, and with a strong return policy, and fast and free shipping.

Its bee my experience that the associates try t upsell me after my EXPRESS indication that I didn't want to be upsold, lacked knowledge about their products (which isn't a problem by itself) and would BS me and pretend they did, often times producting ire and creating more issues and problems for me later with their disinformation.

One day last month, I was there for 2 1/2 hours as their incompentance prevented me from getting items I wanted, and in the end, they sold me the wrng item forcing me to return it later the next day.

I have worked in jobs my whole life in custoer service...my last vocation as a Mortgage Consultant for over 15 years, and I am very forgiving, so if you cheese ME OFF, you must have really screwed the pooch.

This announcement surprises me very little.

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