Best Buy to Shut Down 50 US Stores
Last fiscal year was fantastic for online retailers, but traditional, big-box retailers didn’t fare as well.
Best Buy, one of the country’s leading big-box consumer electronics retailers, can be counted among those that posted a loss for the fiscal fourth quarter. As a result, the company has announced a plan to cut $800 million in costs by closing 50 stores and eliminating 400 jobs by 2013.
During the same time period, Best Buy says it will open up 50 stores in China. The company, which has 1,450 stores in the US and 2,900 across the globe, wants to free up some of its operational energy to concentrate on its smaller Best Buy Mobile stores. In 2013, Best Buy plans to open 100 “mobile small format stand-alone stores.”
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The reasons for Best Buy’s shift in focus and US downsizing is relatively simple—American consumers have shifted interests and sales of TVs, videogame consoles and digital cameras have slowed, while tablets, smartphones and e-readers are selling in record numbers. Add that to the fact that online and mobile shopping is on the rise and you can see why the aisles of Best Buy haven’t been seeing much traffic.
This fiscal year alone, Best Buy wants to make $250 million in reductions. A new information technology program is expected to tighten up the company’s corporate and support structure and eliminate the need for 400 positions.
“The firm is taking incremental steps to address its strategic challenges,” wrote Matthew Fassler, analyst for Goldman Sachs. “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.”