Best Buy To Close Stores After Dismal Earnings Report

MINNEAPOLIS (AP/WCCO) — Best Buy Co. said it plans to close 50 big box stores and open 100 small mobile locations in the U.S. in fiscal 2013 and cut $800 million in costs by fiscal 2015. The news came Thursday as the biggest U.S. specialty electronics retailer posted a fiscal fourth quarter loss partly due to restructuring charges, but its adjusted results topped Wall Street’s expectations.

Best Buy’s strategy of focusing on closing some of its hulking stores to concentrate on smaller Best Buy Mobile outlets illustrates the shifting nature of the electronics industry. Shoppers aren’t flocking to big-box stores like they used to. And sales of TVs, digital cameras and videogame consoles have weaken, while sales of tablet computers, smartphones and e-readers have increased.

Rebecca Jarvis covers financial news for CBS in New York but this headline hit home for the Twin Cities native.

“It’s hard for me because I used to work there, and I really loved my experience when I worked there over the summers in Minneapolis. But they’re shutting down about 50 stores and cutting about 400 employees,” said Jarvis.

Most of the layoffs will be at Best Buy’s corporate headquarters in Richfield. Best Buy hopes to save about $800 million over the next three years as it competes with online rivals such as Amazon.

Best Buy lost $1.7 billion, or $4.89 per share, for the period ended March 3. That compares with a profit of $651 million, or $1.62 per share, a year ago.

The Minneapolis company said its quarterly results included $2.6 billion in charges. They were mostly related to its purchase of Carphone Warehouse Group PLC’s interest in the Best Buy Mobile profit-sharing agreement and related costs, as well as an impairment charge tied to writing off Best Buy Europe goodwill and restructuring charges.

Taking these items out, adjusted earnings were $2.47 per share, above the $2.15 per share that analysts surveyed by FactSet forecast.

Revenue rose 3 percent to $16.08 billion, but missed Wall Street’s $17.18 billion estimate.

Best Buy’s stock fell 32 cents to $26.30 before the market opened.

Revenue at stores open at least a year — an indicator of a retailer’s health — slipped 2.4 percent. But it was a smaller drop than a year earlier when the company reported a 4.7 percent decline.

For the full year, Best Buy lost $1.23 billion, or $3.36 per share, compared with a profit of $1.28 billion, or $3.08 per share, in the prior year. Adjusted earnings were $3.64 per share, which tops the previous year’s $3.43 per share.

Annual revenue rose 2 percent to $50.71 billion. Revenue at stores open at least a year fell 1.7 percent. In the prior-year period, the figure dropped 1.8 percent.

Going forward, Best Buy said it expects to reduce about $250 million of its costs in fiscal 2013. The company foresees fiscal 2013 earnings of $2.85 to $3.25 per share and adjusted earnings of $3.50 to $3.80 per share. Analysts expect earnings of $3.67 per share.

(TM and © Copyright 2012 CBS Radio Inc. and its relevant subsidiaries. CBS RADIO and EYE Logo TM and Copyright 2012 CBS Broadcasting Inc. Used under license. All Rights Reserved.This material may not be published, broadcast, rewritten, or redistributed. The Associated Press contributed to this report.)

  • Sam

    ^ I agree. They need to make a huge change. Only unintelligent buyers would get stuff from them.

    • Matt

      Not completely true. There are some deals that beat online stores.

    • Real Talk

      Those extended warranties are for SUCKERS…not intelligent shoppers.

      You think they sell them because they care about you? Wrong…they make HUGE margins peddling those warranties. It is a gamble to buy them…if you buy it, you are betting your product will break and BB is betting it wont. In addition those exteneded warranties are virtually uselss for the first 2 years…the manufacturer typically offers the same warranty coverage for the first two years.

      Trust me…BB would not offer those extended warranties to you if they did not make ungodly amounts of money off of them. And they make all that money because the products dont usually break, or if they do, they will within the first two years which is covered by the Manufacture anyways.

      • R U Joking

        Real talk is right! Extended warranties is how BB cam back from the brink of bankruptcy back in the day.. They also make huge margins on the addon simple stuff. $60 HDMI cable here. $200 stand there. ect. So yes ONLY SUCKERS fall for this!

    • Flowerladytoo

      Amazon offers square trade warranties…just as good, if not better than the Best Buy warranties, and they DO have a no lemon clause. I have yet to find any company, bricks and mortar, or online, that beats Amazon for customer service. We have bought several big ticket items from Amazon in the last three years and are beyond pleased with them :-) As for the Best Buy no lemon clause…had to utilize one about six years ago. It was a nightmare. We didn’t get the no lemon on the 4th covered repair, it took TWO more repairs and a threat of legal action to get them to honor the warranty. Swore, never again.

  • zee the reporter

    To many websites you can buy from this busness is not going to work anymore!

    • Real Talk

      Websites are big…but really Walmart and Target are killing BB just as much if not more.

      • Nick


    • travis

      I agree I just purchased a sound system online for half of what best buy was asking. If I really need an item and can’t wait for it to be mailed to me, I shop at best buy. The quality of products that best buy sells, in-store, go beyond anything sold at target or walmart… but its more expensive than online… and you have to pay taxes.

  • Jeff

    If we move our head quarters to South Dakota we can save millions on taxes. In return we can save good paying jobs.

    • Old Nurse

      They will also pay you less in South Dakota. There are no guarantees unless you are union. It will be take it or leave it. Be careful of what you wish for.

      • Brett

        Lot’s of GOOD THINGS in South Dakota. If you are TOO BLIND to see them, that’s YOUR PROBLEM. GET A LIFE.

      • blimpy

        Um, unions are part of the problem for many companies and their profitability. They are out dated, past their prime and would not work for BBY.

      • hunnybear18

        I can also live in South Dakota for about half of what it costs me here. For one thing, what I would save in state taxes alone would nearly cover the pay cut.

    • Paul

      What good paying jobs will be saved. The headquarters will be in South Dakota.

  • notagoodstore

    bad store! too many employees just walking around nothing to do. i never buy from them. not surprised its going the way of Circut City.

    • CG

      Agreed, too many wasted miles driving to BB for the “deals” that don’t exist and too many employees that don’t care if you come in & buy as long as they don’t have to help you.

      • Nick


    • Mr. Binary

      Not only bad service but the employees are not knowledgeable. They only recite what’s written on the display. WHICH I CAN DO MYSELF! If you have a question on how you want to use the product a certain way or compatibility issue they may occur they can’t tell you.

  • mark wagner

    people buy on net for one reason no sales taxes is that fair

    • The other 99%

      Yes, for we are already way over tax on everything else in our life. If you can save a little by avoiding one tax why not.

      • truth hurts

        Not true, if you don’t pay sales tax after $600 of online products (for personal purchases), you are breaking Minnesota law.

        For a business, you need to pay your sales tax use on everything the seller doesn’t tax even Ebay purchases.

        It’s the law…you can be honest or a law breaker, you choice.

        • Patrick

          Send in the Department of Homeland Security, IRS, and The FBI.

  • Pete

    Dismal Performance? Nice Title WCCO. They are announcing they beat forecast and analysts forecasts…

    • Paul

      Yet they’re closing stores and laying people off. Sounds pretty dismal to me.

      • Pumphandle

        They’re closing and laying people off because they got to big during the boom like every business, earth to you!

      • Pete

        Weird, a company willing to change to win. Why is that such a rarity these days I wonder?

  • Barb Cline

    The want to compete with the big guys, but the day of at least 10 per store on sales day does not cut it any more. And the online mess at Christmas time really hurt them. You have to have big stock now days!

    Everytime I have shopped there, the item I am looking for is not in stock and they want to sell me something else. They never offer to bring what I want in from another store, the last time it was suggested I drive to Rochester from St. Paul. I did not. And will not be going back anytime soon.

    • Capt. Obv.

      Its not difficult to go on their website and it will tell you which store stocks the item you’re looking for, you say they never offer to bring the item to their store? Why do people come on here and make stuff up, you go in there you buy it, it’s shipped to that store you pick it up days later.

      • Disco Boots

        The vast majority of what you see posted here is not ‘made up’; it’s actual experiences.
        Using your example, I have to ask: Why would I opt to go to the BB site, find the item, have it shipped to their store and then have to drive there days later to pick it up, when I can just as easily order it from an online vendor who has it in stock (such as Amazon), and have it shipped to my door in one day? That’s just silly. The lack of sales tax offsets a good portion of the added shipping expense. Even if the prices were equal (which they usually are not, especially when you add in the little add-ons that a purchaser usually wants), the online wins nearly always. And I hate to tell you, after owning an IT consulting firm for 15+ years, the very few times (two out of two instances) I had the people at their Geek Squad desk give me an estimate of what they suggested needed to be done to a computer one of my clients had purchased from them, they missed the problem.
        I think you have to admit, given their sales have dropped, you hear the same complaints from previous customers over and over again, and they just don’t seem to want to listen; given all that, for me it smells of terrible management.

  • Capt. Obv.

    Exactly they beat the numbers expected, the simple fact is in todays economy you don’t need a best buy in every suburb, there are other options also, I have never had a problem with them, today im getting a washer and dryer delivered from them today $70 for delivery is nothing, and it will be an employee of Best Buy. When you buy an item from a random internet supplier you will get an independant contractor who doesn’t represent the company but only themselves and being in the business they could care less about your experience.

    • Exp

      I hate to burst your bubble, but the dishwasher I purchased from Best Buy half a decade ago was delivered and installed by an independent contractor that Best Buy hired. So, unless this practice has changed, your delivery might NOT be by Best Buy proper.

  • jimmy

    BB wrote the big check to the GOP/TP claiming it would make for a better business climate.
    How’s that working for them?

    • Pumphandle

      They beat their forecasts so id say it worked out good for them, they’re just to big from the boom they will trim down and move on

    • killthethugs

      Hey Jimmy, Versus if they wrote the check out to the DFL/Dayton they would be taxed out of business and made to be the bad company in the press for going out of business and not paying taxes anymore. Not sure which model works better, but at least they will still be payign some taxes and employing some under the GOP plan.

    • c shibley

      I worked for these guys years ago,when we were forced to sell extended warranties,or face coming in on Sunday morning and be preached at for not selling enough of somthing the consumer didn’t need. Why do you think they are as big as they are? They made 100% profits from them! Ah,the good old days!

  • keel

    Face it…outdated business model as others have noted. I buy a moderate amount of stuff…electronics included…and almost without exception, have found better prices on Amazon. I usually get free shipping and, when something goes wrong, immediate replacement…no questions asked. On occasion, Target also has better prices than BB. Hate to say it because I was a stockholder in BB for a long time…but lack of performance led me to sell it. Times change…so do businesses…

  • Geezer

    Most of the items they sell are out of date technology.When Pci express graphics cards came out they did not even have any.They did not ever hear of one before?

  • danman3625

    good best buy sucks their return policy sucks i am happy best buy is loseing money because they aint getting no of mine

    • Pumphandle

      Judging by your english you’re not making enough money to buy anything.

      • Pete

        Nice one…made me laugh…

    • djp

      was that supposed to be none of mine or no more of mine??? Spell check kiddo

  • Dave

    I can’t wait until the BB at MOA closes and it’s replaced with an LA Fitness!

  • mr.obvious

    Best buy is expensive. I was looking at picking up a simple sata cord.

    -best buy cost 20 bucks
    -amazon 3 bucks
    -microcenter 5 bucks

    my choice was clear. i went to microcenter.

  • djp

    I am not surprised…due to their lack of “Customer Fullfillment” as they call it. I have been lied to a number of times about a refund coming. It WAS supposed to be here in January. I can find what I want on QVC for less money than there too!!

  • not quite

    Buying from Best Buy is like going to the new car dealer and paying the full MSRP on the window sticker.

  • Liquid Nails

    What will hurt them more is cutting staff in their stores. Right now it takes forever to get help when you need it.
    It is a double edge sword. Cut staff to save money- lose the customer service I am looking for.
    To tell you the truth, their store fronts are ugly, the store is too noisy inside, and a lot of the help know more about extended warranties than the products they sell.
    I hope they get it together, but this may be the start of a big decline.

  • outsourcing is good

    so all the outsourcing that they, Target, adn all the other major employers did in the area along with Delta pretty much pulling out, and they wonder why this is going on? 5th highest taxed state in the nation and no high end jobs here anymore, I wonder why they are cutting back, NOT.

    • Charlie Chan

      So the answer is to close fifty stores here, and open fifty store in Communist China.

  • Best Buy Trimming Stores And Corporate Staff, Hoping To Cut Prices « CBS Minnesota

    […] Last year, Best Buy lost $ 1.2 billion on sales that declined 1.7 percent. Pressure is on company ex…The company has announced plans to close 50 stores in the U.S. and cut corporate and support staff by 400 positions. […]

  • we

    Good Bye Best Buy

  • Good Riddens

    Read this wonderful article from Forbes on why “Why Best Buy is Going out of Business…Gradually”

    So long Junk Buy, good rid-dens.

  • Disco Boots

    There was a time, when a group of us built that company into what was to become ‘Best Buy’. We did it in a ways that people trusted, appreciated, and returned time after time. That same company lost it’s way by not listening to the customers. The culture and methods they current have are a direct result, one-on-one result of policies that non-sales people have instituted over the years. And Brian Dunn knows it; but it appears he prefers to not make any waves in favor of his $10MM salary. That’s part of the problem: not the salary, just the loss of the Entrepreneurial Spirit and the flexibility to win. Too bad for everyone. All the comments above (except the South Dakota non-sense) are valid. There are reasons the people on the floor don’t help: Indirectly, they are told to, yet all the layers of management above the store level don’t want to acknowledge what they are doing to cause it. This is not the first company to go through the same non-sense.
    I know I could turn this thing around. (I turned around two computer hardware companies.) Would take about six to twelve months, and is completely do-able. Hell after 30 years, I still hold sales records at BB that haven’t been surpassed. If the Board wants to find me, just do some research on the moniker: ‘Disco Boots’ from past employees. (The current organization lost their mojo a long time ago, and they have ridden the investors money for a long time.)

  • Disco Boots

    I agree. It’s an old sales model, way past it’s prime. But for some bizarre reason(s) which I would guess were thought up by non-salesperson types, the company still holds onto them. They get hammered everyday by Walmart (who has their successful model), Target (who has their successful model), and every Internet reseller from Amazon to Tiger Direct to NewEgg to Ebay to Dell and the list goes on and on and on. Hell, even the company-operated cellphone storefronts are eating their lunch on service alone. AND THEY STILL DON’T GET A CLUE! It appears there isn’t a venue they aren’t getting their butts whipped in. And the worst part for them is that all these competitors are sharpening their marketing and sales models, becoming even more competitive while BB continues to stamp their feet and insist they know what they are doing. I can only guess what the management meetings must be like.
    Your example about the high-margin add-ons is a great example and has been there for decades. It backfires on them every time though. The customer may agree to spend 500% the price in-store simply because the harder major sales decision has already been made and it’s just easier to agree on the smaller pieces; but once they get home and see how they were comparatively over-charged, they are going to lower their opinion of their purchasing experience and turn to looking for an alternative competitor, which we all know they will find online and opt for next time around. This utter stupidity, especially in light of the much higher market savvy of today’s buyers, is soooooo short-sighted. And they are seeing the results. If it continues (which changing the appearance of the store will do nothing to correct the real problems), market natural selection will continue to proceed. We saw it with so many others: Circuit City, Ultimate Electronics, CompUSA. All too rigid, too spoiled, too egotistical to change. It seems they just can’t admit that what they ‘think’ is happening, really isn’t what is happening. Too bad for everyone.

  • Disco Boots

    Flowerladytoo’s example is not unique.

  • Disco Boots

    This is from their News Announcement at:

    Best Buy plans to expand the benefits under its Reward Zone Silver loyalty program, whose members account for a significant percentage of the company’s profit. Reward Zone Silver customers will receive exciting enhancements including free expedited shipping, premier access to many of the most popular products and major sales events, a free house call from the Geek Squad, and 60-day no hassle returns and price-match policy.

    Again, they miss the mark. They need new customers and past unsatisfied customers to come back and give them another chance. So instead of focusing on them, they focus on the existing high-spenders, (usually the corporate accounts whose employees order without regard to price and instead focus on convenience and pressure to correct a problem at any price, so it’s very profitable); yet BB is going to cut into that profitability…… Do I have that right? Really??? I would call that just, ….. ridiculous. It strikes me as the type of decision that disconnected (from the sales floor) upper management would make.

blog comments powered by Disqus
Thursday Night Football

Listen Live