Best Buy (NYSE: BBY) has announced it will furlough 51,000 hourly in-store employees and all part-time employees, or about 18% of its store and field workforce, due to impact from the novel coronavirus (COVID-19). The company says it will retain “the vast majority” of its In-Home Advisors and Geek Squad Agents, despite shifting to an all-virtual support system several weeks ago.
Best Buy reports it has been able to retain about 70% of its total sales volume during the crisis with its curbside pickup program in place and with its online sales up 250%.
Other steps being taken include:
- Beginning April 19, some corporate employees are participating in voluntary reduced work weeks and resulting pay, as well as voluntary furloughs.
- CEO Corie Barry will forego 50% of her base salary and the members of the Board of Directors will forego 50% of their cash retainer fees through at least September 1, 2020.
- Company executives reporting directly to the CEO will take a 20% reduction in base salary through at least September 1, 2020.
- Other actions include:
- Lowering merchandise receipts to match demand with a focus on essential items for our customers
- Extending payment terms in partnership with key merchandising vendors
- Reducing promotional and marketing spend aligned to temporary operating model
- Lowering capital spend to focus on mandatory maintenance or high-value strategic areas
- Suspending 401(k) company matching program
CEO Corie Barry says, “The situation we are all facing as a result of the COVID-19 pandemic is truly unprecedented. As we previously communicated, we made the decision for the health and safety of our customers and employees to shift our stores to a temporary enhanced curbside service-only model starting March 22. At that time, we also suspended all in-home delivery, installation and repairs.”
Barry continues, “I am so incredibly proud of our teams’ execution – they seamlessly implemented a new and highly effective operating model in a matter of 48 hours across our entire store base. We are fulfilling essential technology needs for customers in a safe and innovative way, including continuing to provide remote technical advice and support. This time of working, learning, cooking, entertaining and, importantly, connecting across the country from home only underscores our strategy and purpose: to enrich lives through technology.”
“We have retained approximately 70% of our sales compared to last year since moving to our enhanced curbside service model despite the fact that all our Domestic stores are closed to customer traffic and approximately 40 of them, particularly in the Northeast, have been completely closed to all business for at least 10 days at our discretion,” Barry continues.
“This is a testament to the strength of our multi-channel capabilities – as our Domestic online sales are up over 250% and approximately 50% of these sales are from customers choosing to pick up their products at our stores since moving to our curbside service model.”
From the first days of the pandemic, the company made these decisions related to its employees: (1) Best Buy employees do not have to work if they do not feel comfortable doing so; and (2) they should stay home if they are feeling sick, knowing they would be paid. All retail and field employees whose hours were eliminated when the company shifted to the curbside service model are being paid for their regularly scheduled hours through April 18.
Barry concludes, “The situation remains very fluid and there is still a great deal of uncertainty, particularly as it relates to depth and duration of store closures and consumer confidence over time. We are taking the steps necessary to resume providing our customers in-home services in the near future, keeping in mind our overriding priority on the safety of our employees and customers. We are also preparing to re-open stores to customers as soon as it is safe to do so, with timing likely to vary at state and local levels. In the meantime, as you would expect, we are focused on making the difficult decisions necessary to ensure that at the end of this crisis Best Buy remains a strong, vibrant company.”
In order to help employees financially impacted by the pandemic, Best Buy has partnered with its founder, Dick Schulze, to establish a $10 million employee assistance fund, available to all part- and full-time hourly employees who have been with the company longer than one year. Best Buy and Mr. Schulze shared equally in the creation of the fund and the company’s portion was paid by repurposing the majority of its annual corporate giving budget.
Best Buy Sales Update
The company’s sales for the 9-week period ended April 4, 2020, declined approximately 5% on a year-over-year basis. The following provides additional information regarding estimated quarter-to-date results:
- The company’s quarter-to-date sales through March 20, 2020, grew approximately 4% and were ahead of original expectations.
- In the eight-day period ended March 20, 2020, sales grew approximately 25% as the company experienced a surge in demand across products that people need to work or learn from home, as well as those products that allow people to freeze food.
- While the company is still seeing heightened demand for these products, as well as gaming products, the company’s year-over-year sales declined approximately 30% from March 21, 2020, when the company announced its decision to shift to the interim operating model and close all of its Domestic stores to customer traffic, through April 11, 2020.
As a reminder, on March 21, 2020, the company announced that it withdrew all previously issued financial guidance for fiscal 2021 and, to bolster its cash position and maximize flexibility in this fluid environment, drew the full amount of its $1.25 billion revolving credit facility and suspended all share repurchases.
The company will provide additional business updates when it releases its Q1 FY21 results in late May 2020.