Best Buy to Close 50 Stores & Cut Down Jobs
In an effort to keep up in its rising costs and sliding sales, Best Buy announced on Thursday morning the closure of 50 big box stores and elimination of about 400 corporate jobs across the United States in its fiscal 2013.
Together with the announcement of closings, the company said it will cut the total square footage of its Twin Cities big-box stores by 20 percent through a combination of closings and downsizing as it looks to reduce costs by about $800 million over the next three years. Store closings will free up $250 million this year and another $550 million by 2015, according to company projections.
Best Buy Restructures to Connected Stores
Best Buy plans to use the savings to convert its big boxes with smaller “connected stores” which will sell more connections and services with more focus on mobile phones and tablet computers. It will also be used to fund training and customer service incentives for employees, and lower prices and extra perks for customers.
The Twin Cities and San Antonio, Texas, will be the first markets to transition to the concept entirely with the Twin Cities market roll out expected by fall of 2012 which will be followed by San Antonio by year-end. The company, meanwhile, will add 100 more Best Buy Mobile stores in those markets. It expects to have a total of between 600 and 800 Best Buy Mobile stores open by 2016, up from 305 today.
“These changes will also help lower our overall cost structure. We intend to invest some of these cost savings into offering new and improved customer experiences and competitive prices, which will help drive revenue. And, over time, we expect some of the savings will fall to the bottom line,” Best Buy CEO Brian Dunn said in a statement.
Twin Cities Closures
Best Buy’s earlier announcement on Thursday morning was followed by another announcement same day at night saying that five stores in the Twin Cities will close sometime in the fall of 2012.
According to the company’s statement, Best Buy stores in Brooklyn Center (5925 Earle Brown Drive), Edina (3200 Southdale Circle), Hutchinson (1350 Highway 15 South), Lakeville (18350 Orchard Trail) and Rogers (20870 Rogers Drive) will be affected. The closure will affect a total of 301 employees.
“This is not an easy decision to make. We recognize the impact this news has on the people who deserve respect for the contributions they have made to our business, and for customers who shop these stores today. We are working to ensure the impact to our employees will be as minimal as possible, while serving all customers in a convenient and satisfying way,” Best Buy said in a statement.
The Connected store concept is a smaller-scale location emphasizing products such as mobile phones and tablets, plus in-store service offerings such as Geek Squad tech support. It will feature a “Central Knowledge Desk,” similar to Apple’s Genius Bar where customers can receive technical support and even take classes.
Best Buy has been facing stiff competition with Apple stores and online retailers such as Amazon. More and more customers are migrating to online shopping where they often find better deals. This forces Best Buy to figure out a reason why shoppers would need to visit an actual store.
In its fourth quarter results that ended last March 3, the electronics retailer reportedly lost $1.7 billion, or $4.89 a share. A year ago, the company made a profit of $651 million on revenue of $16.26 billion, or $1.62 per share. Best Buy expects revenue for its current fiscal year to stay flat at around $50 billion.