Best Buy Closing 50 US Stores After $1.7B Quarterly Loss
Best Buy reported a fourth quarter loss of $1.7 billion, which results in the big-box retailer closing 50 U.S. stores and cutting $800 million in costs by fiscal 2015.
After announcing a $1.7 billion loss for its fiscal fourth quarter that ended March 3, 2012, Best Buy says it plans to close 50 of its big-box stores in the United States and cut $800 million in costs by fiscal 2015.
According to the Associated Press (AP), the performance compares to a $651 million profit the same time the year before and was an improvement over the same quarter last year.
Best Buy, which says the loss is partly due to restructuring charges, will open 100 small Best Buy Mobile outlets throughout the U.S. Best Buy says sales of TVs, digital cameras and video game consoles have declined, while sales of tablets, smartphones and e-readers have increased.
Best Buy, which is trying to avoid the fate of former rival Circuit City that went out of business in 2009, saw revenue rise 3 percent to $16.08 billion, but it missed Wall Street’s $17.18 billion estimate. Revenue at stores open at least a year slipped 2.4 percent. But it was a smaller drop than a year earlier when the company reported a 4.7 percent decline, according to the AP.
Best Buy says it will change its employee compensation model to revolve around customer service and business goals.
“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,” says Best Buy CEO Brian J. Dunn. “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.”
Best Buy lost $1.23 billion for the entire year, compared with a profit of $1.28 billion the prior year.
According to the AP, Best Buy expects to reduce about $250 million of its costs in fiscal 2013 with fiscal 2013 revenue of $50 billion to $51 billion.
“The firm is taking incremental steps to address its strategic challenges,” Goldman Sachs analyst Matthew Fassler tells the AP. “That said, the soft close to the quarter, and subdued sales guidance, suggest that competitive pressure may be drifting into market share as well as margin, with Apple stores and Amazon.com the two most likely culprits.”
Steve Crowe has been writing about technology since 2008. He lives in Belchertown, MA with his wife and daughter. Have a suggestion or a topic you want to read more about? Email Steve at [email protected]
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