Best Buy to close 50 stores, losses total 1.2 Billion

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http://www.startribune.com/business/144875875.html

Faced with a stubborn slide in sales at its U.S. stores, Best Buy Co. Inc. announced Thursday its steepest round of cuts: closure of 50 big box stores and elimination of 400 positions at corporate headquarters in Richfield.


Company officials did not reveal which stores are on the chopping block or say how many store employees will lose their jobs. But the number of layoffs will likely be in the thousands since each store employs roughly 100 workers, including so-called Blue Shirts and Geek Squad technicians.
Best Buy, once known as the undisputed discount king of consumer electronics, has been struggling to find its place in a world dominated by flashy high-end brand temples like Apple Stores and low-cost Internet retailers like Amazon. Customers have been increasingly migrating online, where they often find better deals, forcing Best Buy to figure out a reason why shoppers would need to visit an actual store.


Last year, Best Buy lost a staggering $1.2 billion as it deeply discounted merchandise to keep pace with rivals Amazon and Wal-Mart.
All in all, Best Buy hopes to shed $800 million over the next three years, savings the company plans to use to fund its new "connected" store remodels, international expansion and digital services. But even CEO Brian Dunn admits the company's efforts to remake itself are fraught with frustration and uncertainty.

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They seem to cant compete with Amazon and the apple stores of the world.
 
Even with this change they still don't get it. Closing only 50 stores isn't going to be enough. The company has way to much expensive square footage. The need to move away from the "big box" model, actually they should have started moving away from it when Circuit City died a few years back.

BB isn't going away anytime soon but they certainly do need to increase their urgency in terms of changing the business model.

Also, that $1.2 billion loss includes a few very large one time charges related to the closing of some Euro brands as well as the purchase of some mobile brands. The actual day to day operations of the traditional retail business did not result with a loss that large.
 
Best Buy is blaming Amazon.com for the loss of customers but they need to look themselves in the mirror too. There has been nothing but shitty service at those stores. 2 examples:

1. Whenever you order something for pickup - I found that they don't necessarliy have the pickup item at the customer service desk. Sometimes they don't have it at all.

2. For years, the Geek Squad had a policy of opening boxes of new laptops and Computers and installing software on them - then turn around and sell them new. This was documented on the Consumerist.com the last couple of years. All that software did nothing but slow down the computers. Here is the link: http://consumerist.com/2010/01/cons...-is-a-big-stupid-annoying-waste-of-money.html
 
Why do you say that?

I believe Apple has a firm hold on most casual electronic customers. Have you ever been to an apple store? There are like 50 thousand people in there at any give time. As much as I dislike using apple products their service, care and advertisements work like a charm for most mainstream people.

Now, on a professional media level apple and shitty FCPX is considered kind of a joke and has been for a while now. They have completely lost the professional market and from what I got at the local production workers conference they all by have completely abandoned even trying. They seem to be fully going after the "indie market" just brought on the wrath of about 7 major production houses for lack of support. Hopefully can sell 400 million dollars worth of ipods to match just one of those companies jumping ship.

For a professional video person.....Apple is really shitty but for everyone else its great. I dont see them going anywhere anytime soon.
 
Yeah that optimization on the laptops is horrible. I bought a laptop last year since I had almost $400 in gift cards. To find a non optimized model that was around $80 to $100 more was a challenge. They ended up only having them in the back room. Then we had to say no to an extended warranty 5+ times. At sears and tru they ask you once and that is it.

Then a few years before that, we needed a laptop and they had a decent one advertised for $399.99. We went to buy it and were told they didn't have any of them out on the sales floor (not a demo unit or any to actually buy) and were also told we didn't want it anyway and should buy a more expensive and more powerful laptop and the employee started to show us $500 and $600 laptops. Bait and switch at its finest. We ended up going to Costco instead.

The other problem is their prices on a lot of items just aren't that good. They can blame Amazon and Walmart but when you are almost 50% more on an item, of course no one is going to buy it. I bought a portable heater at Target a few months ago for $8.98 on clearance. The regular price was $29.99. Even if you go with the regular price at Target of $29.99, BBY is still $12 more.
 
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[quote name='Xevious']Best Buy is blaming Amazon.com for the loss of customers but they need to look themselves in the mirror too. There has been nothing but shitty service at those stores. 2 examples:

1. Whenever you order something for pickup - I found that they don't necessarliy have the pickup item at the customer service desk. Sometimes they don't have it at all.

2. For years, the Geek Squad had a policy of opening boxes of new laptops and Computers and installing software on them - then turn around and sell them new. This was documented on the Consumerist.com the last couple of years. All that software did nothing but slow down the computers.[/QUOTE]


I think best buy is one of the last traditional big box stores, which is a breeding ground for 16 year olds because thats what you do during the summer.

I never ban a store but I avoid best buy like the fucking plague. Every time I go in there, its 10 employees huddled in a circle with their hands in their pockets ignoring the 5 customers walking around. They also have that old school "hard sell" where everything you buy comes with a suggestion to buy some other 80 dollar product.
With the internet now, customers are not as dumb as they used to be. Many of them google everything before they buy it they are not going to respond to that hard sell anymore. Again, I dont dive into apple products but they are one of the few companies that treat you like a king when you step in the door. They seem to value the fact that its FAR easier to just order something online then to go in.

I love marketing (I wish I had time to take classes again) but now a days you have to engage customers the second they walk in the door, not by pushiness but really making them feel welcome in the store.
 
[quote name='camoor']Bye bye best buy

In less then a decade the Apple stores will follow[/QUOTE]

Apple stores are a completely different animal and have more sales per sq ft than any other retail chain.

So you know, you're wrong.
 
The one Best Buy near us went through this massive renovation recently. You can tell digital distribution (and perhaps things like Netflix and Redbox) is hurting them badly. Our store went from about 6 aisles devoted to DVDs and Blu-rays, which took up the front-center to the store to about 2 1/2 aisles near the rear of it. The store now has about 1/4 for home appliances, 1/4 for televisions, 1/4 for computers, and games (surprisingly), computer software, CDs, and movies where they can fit in the rest in almost this approach that looks like they just put them where they'd fit.
 
So Best Buy added those music sections to compete with Guitar Center, Sam Ash, etc. I wonder if that's paid off? I don't thing those giant guitar chains have been doing so hot, but I have seen them add recording studios to their stores. Maybe that's what Best Buy needs - recording studios! Geek Squad can run them when they're not installing bloatware on laptops or browsing through people's personal files during repairs.
 
I remember reading an article, i think last year, was about how people come into B&M stores to see items and then buy them online instead. I remember Bestbuy being particularly pissed about it. What, you expect us to feel sorry for you? Like it's somehow our fault you missed the train that is online retailing?
 
[quote name='camoor']Bye bye best buy

In less then a decade the Apple stores will follow[/QUOTE]

You obviously know nothing about Apple stores...
 
BB is in the process of updating its stores to try and be more like AAPL stores, more focused, fewer low margin crap products that no one buys anyway. AAPL stores have the highest profit per square foot on the planet.

Best Buy simply has to much expensive square footage. They need to shrink their footprint and cut a lot of the real estate costs and expensive leases they are tied up in. The company is nowhere near being Circuit City at this point but unfortunately the changes they are just now starting should have started the day after Circuit City shut down.

They are definately playing catch-up but at least management is finally realizing that the market has changed and that BB must change as well.
 
[quote name='dohdough']Net profit for FY2011 was about $1 billion.

http://finapps.forbes.com/finapps/jsp/finance/compinfo/IncomeStatement.jsp?tkr=bby&period=qtr

The loss is relative to FY2010 profits and the company is actually doing fine. Easier to fire people than improve services I suppose.[/QUOTE]

BB really effed up about 10-12 years ago. They were highly profitable in a cutthroat market. Then they needed to shine their ego by relocating their headquarters which brought up a HUGE eminent domain battle where the city of Richfield basically screwed over 40 homeowners and forced a few businesses to leave too. Now that eddifice of corporate overreach stands less than 1/3rd full and even has an entire wing that is blacked out and locked. They started building stores just to have more stores with little rhyme or reason to the operation.

Their instrument sections are lousy and not staffed by your typical guitar shop people. One can tell since their guitars are rarely in tune and the "store" isn't setup very user friendly either.

In the end, I don't think dropping 50 stores is merely profit driven, they need to trim about 50 more...
 
[quote name='utopianmachine']It's hardly surprising that Best Buy is closing. Any media they sell is nearly always cheaper elsewhere, especially at Amazon.[/QUOTE]

What media do they even sell any more? Their CD and DVD/Bluray sections are puny and consist of only the most recent releases. Ditto their video game section. Most of the store is hardware that is the same price or cheaper someplace else, so mr burnz is right. There's no reason to go in Best Buy except to look at a TV or tablet in person and then buy it for cheaper on Amazon. There's only so many people you can scam into buying Monster cables and PRPs.
 
[quote name='utopianmachine']It's hardly surprising that Best Buy is closing. Any media they sell is nearly always cheaper elsewhere, especially at Amazon.[/QUOTE]


Amazon hasn't been very hot for video games lately (except Digital Downloads).

I browse CAG to find deals on video games not home appliances and other junk. I can't think of a single B&M store that has had better video game deals the last few weeks or months.

If you don't like the "hard sell" just buy online for instore pick up or have it shipped to your home. Not that difficult to do.


Other then Walmart and Target Best Buy is one of the few places that price matches and they give you a rediculously long time to do it especialyl if you are RZ Silver member. Try PMing at Gamestop or TRU and let me know how it goes.
 
That's what they get for getting rid of $9.99 CDs. They probably should just get rid of the Geek Squad too. 90% of those guys don't know their ass from a hole in the ground. They exist just to rip off luddites on social security.
 
The problem with Geek squad is the same problem with all traditional retail places. They pay min wage to basically high school kids and summer college kids. Not only are they untrained they have no motivation to not be shitty. Instead of having 20 untrained "only know more than your mother" geek squad member fire them and have 5 fully trained techs.

But thats not the way of traditional American business, they would rather have 50 shitty ass people and pay them all min wage than hire 1 person who posses more skill and talent for their rate. O Noes I have to pay them benefits? Screw the potential for them to pull in money 3:1 in comparison.
 
First Kmart then Circuit City then if Best Buy falls That only leaves Wal Mart for me
I do have a Meijer but the electronics department is very minimal. In ex. small selection of tvs, no pcs, little selection of video games.
 
[quote name='dohdough']Net profit for FY2011 was about $1 billion.

http://finapps.forbes.com/finapps/jsp/finance/compinfo/IncomeStatement.jsp?tkr=bby&period=qtr

The loss is relative to FY2010 profits and the company is actually doing fine. Easier to fire people than improve services I suppose.[/QUOTE]

Kudos to you, good sir, for understanding more about business than most CEOs. I agree with your assessment on refining service polices and I will raise you by suggesting that they focus on shifting towards a more competitive online branding to stay relevant. This is especially true when considering how many people feel that it is a showroom for other online retailers (I do this myself as well). The B&M business model is going to the wayside... reminds me of another industry leader who failed to adapt to a better media delivery service in the face of changing technology (Blockbuster Video). Get with the times Best Buy.
 
Another problem with Best Buy is that they've continually chipped away at their loyalty rewards program over the past few years. It used to be, if I was going to buy a game, I checked prices at Best Buy first. If I could get some of the money I spent on games and electronics back, it made me want to shop there. Now, the amount you get back versus the amount you spend are so far apart, that there's no way I'd benefit, especially when I could get stuff cheaper elsewhere.
 
i bought the PSP VITA and a Platation 3D Display with the 4 year WT from them should i get a refund
 
They won't be going out of business as a company in the next four years. No need to worry. The sky isn't falling; we just have idiots on this site who are rejoicing over the news of a few closures (cutbacks) and don't understand that if BB closes (which isn't happening anytime soon) it is only going to hurt the video game market.
 
it also going hurt there sales if people know that there going out of business because who going to buy from a deading company


and there's also two sides to a company closing

the good
1. you get cheap stuff

the bad
2.alot of people lose there jobs
 
[quote name='GBAstar']They won't be going out of business as a company in the next four years. No need to worry. The sky isn't falling; we just have idiots on this site who are rejoicing over the news of a few closures (cutbacks) and don't understand that if BB closes (which isn't happening anytime soon) it is only going to hurt the video game market.[/QUOTE]

Where'd you get that 4 years number?

The first signs of trouble at Circuit city began in December 06 when they missed their sales goal for 3rd quarter; the first announced store closures were in February 07. By February 09 they were liquidating.

Then you have a company like Kmart that's showed signs of being on the brink of collapse for more than a decade. There's really no way to know for sure how long Best Buy can hold on for; there's far too many factors in play to say for certain.
 
[quote name='RedvsBlue']Where'd you get that 4 years number?

The first signs of trouble at Circuit city began in December 06 when they missed their sales goal for 3rd quarter; the first announced store closures were in February 07. By February 09 they were liquidating.

Then you have a company like Kmart that's showed signs of being on the brink of collapse for more than a decade. There's really no way to know for sure how long Best Buy can hold on for; there's far too many factors in play to say for certain.[/QUOTE]

All you have to do is watch the balance sheet. At this point Best Buy is not burning through its cash reserves. When you start seeing its balance sheet shrink and cash reserves dropping dramtically without clear explanation......then you know the ship has some rather large holes in it. Cutting or eliminating its dividend would also be a very bad sign and they just increased that 2 quarters back.

These recent announcements not only re-enforce a stable balance sheet but they aim to make the company more competitive in the current retail marketplace where consumers are clearly favoring online and small "community" style stores to that of the traditional "big-box."

I personally would have liked to see the number of stores being shut down more along the 100-125 area, or roughly 10% of the current "big box" stores they currently have in place.

Since you mentioned Kmart I will bring up one huge difference between BB and Kmart. Kmart owned the vast majority of their stores, the actual real estate they sat on. BB does not. They lease or rent pretty much everything just as CC did, which is part of the problem they are fighting now.....being tied into a bunch of expensive lease agreements. Kmart has been able to hold on for so long partly due to the basic value of the real estate holdings of the company and the flexibility that it provides them in terms of financing buisness operations and leverage. BB would not have the same type of flexibility if things got really bad.
 
[quote name='Rogueleader17']Is there a list of stores that are closing anywhere?[/QUOTE]

According to the conference call last week, the list of stores being close/restructured will be released toward the end of April. I wouldn't count on a lot of clearance sales though as these stores will not get any new product shipped to them and any product of value will certainly just be shipped to other stores in the area.
 
Wouldn't matter anyway, liquidation sales suck. They're good for hooking the people who think 10% off is a deal, but by the time something gets to around 50% (if it does) it will be gone because somebody already bought it once it hit 25% off. Kmart actually has been the worst liquidation sale I've ever seen. The deals on games weren't bad, 40% off the last time I was there, but everything else was crap. They know they can just ship the stuff to other stores.
 
Price of gas keeps rising, meaning people stay inside more and order online. I live in the northeast, and I have to drive 45 minutes to my nearest Best Buy, which is a trip I don't make often nowadays. Tackle the almost $4 per gallon gas and heating prices, and the economy wouldn't be so shitty.
 
[quote name='Blade']Tackle the almost $4 per gallon gas and heating prices, and the economy wouldn't be so shitty.[/QUOTE]

Possibly, but it ain't going to happen. Higher oil prices are the new reality.
 
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