Bye-bye big box: Best Buy to downsize stores after profit drops
Best Buy’s sprawling blue big-box stores will start disappearing this year, replaced by more compact shops and mobile-only stores as the country’s largest consumer electronics retailer tries to reclaim revenue from rivals such as Amazon.
The company will shut down 50 of its large-model stores this year while testing new branches that are 20% smaller in San Antonio, Texas, St. Paul, Minn. and Best Buy’s Minneapolis hometown.
The downsizing has been in the works for months. The electronics giant also wants to cut $800 million out of its costs by 2015, including $250 million within the next fiscal year.
The more petite “Connected Stores,” where employees will sell e-readers, tablet computers, cellphones and service plans, will be completed by Christmas, Best Buy said Thursday, while reporting a profit slump in its fourth quarter.
In 2013, the company plans to open 100 small-scale mobile stores on top of the 305 that are currently open. By 2016, the total number will expand to 600 to 800 mobile stops.
Amid the store openings, Best Buy also wants to save $300 million by slicing 400 jobs out of its payroll.
“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,” said Chief Executive Brian J. Dunn in a statement.
In the quarter that ended March 3, Best Buy suffered a $1.7-billion loss, or $4.89 per share, compared to a $651-million profit, or $1.62 per share gain, over the same period a year ago. But without the company’s $2.6 billion in one-time charges, adjusted earnings were $2.47 a share.
Revenue was up 3% to $16.08 billion, but analysts had expected more than $1 billion on top of that. Same-store sales at locations open more than a year tumbled 2.4%.
Over the full fiscal year, Best Buy lost $1.23 billion, or $3.36 per share after making a $1.28 billion profit, or $3.08 per share gain, the year before. Revenue increased 2% to $50.7 billion, though same-store sales were down 1.7%.
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