In an evolving retail strategy, Best Buy announced Thursday it plans to close 50 stores next year.
The Minneapolis-based chain outlined a “transformation strategy” to improve business performance. The plan calls for closing 50 big box stores, cutting 400 corporate jobs and support areas, and trimming $800 million in cost.
The company did not reveal the specific locations of the stores it will close. Those details will come later.
Kelly Groehler, Best Buy public relations and communications, released a statement when asked about which stores are slated to close in 2013.
“We are taking the necessary steps this next year to evolve our total retail store strategy, and make it even easier for customers to shop with Best Buy and access our services,” Best Buy reported. “To achieve this, one of our first steps will be the closing of 50 U.S. Best Buy stores to fuel growth initiatives that will include Connected stores that provide better service and product interactivity.
“We are deliberate and thoughtful when we make such decisions. We are working to ensure the impact to our employees will be as minimal as possible, while serving all customers in a convenient and satisfying way. We will announce details about specific store locations and timing for closings once they are finalized.”
Best Buy reported a net lost of $1.7 billion for its fiscal fourth quarter, which ended March 3, compared to a profit of $651 million the previous year. For year-to-year comparisons, Best Buy lost $1.23 billion for this fiscal year compared to a profit of $12.8 billion the previous year.
Brian Dunn, Best Buy chief executive officer, said: “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.”
The plan is to close big box stores and remodel others into the Connected store format and add 100 Best Buy Mobile stand-alone locations.
Best Buy has 305 Mobile stores now but expects to have a total of 600 to 800 Mobile stores by 2016. Connected stores allow customers to play with and compare devices. The Mobile stores were founded in 2006 aimed at customers buying mobile phones. In addition to being inside Best Buy stores, the Mobile speciality stores were set up in hundreds of locations outside Best Buy stores.
An operating environmental change Best Buy highlighted in its plan to transform the company is a new labor plan. Best Buy says the labor plan is designed to increase employee training and provide enhanced compensation using financial incentives to meet customer service and business goals. The model, Best Buy said, is based on what has been used with success in its Mobile stores.
As a sign of the times, a Best Buy revenue category of “home office” has been renamed “computing and mobile phones.”
Best Buy conducted store pilots in 2010 and 2011 and reported it is using those results in deploying “at-scale” market tests of that format in the Twin Cities and San Antonio, Texas metro areas with store remodels completed in time for the 2012 holiday shopping season. Best Buy reports the change means it will decrease its square footage by almost 20 percent in the combined test markets while increasing its presence by more than 20 percent. The company expects online sales to grow 15 percent in fiscal year 2013 and reach $4 billion in those sales by fiscal year 2016.
Best Buy plans to open 50 new “Five Star” stores in China fiscal year 2013, with a target of $4 billion in sales and growing from 204 of the stores to 400 to 500 by fiscal year 2016.
“Best Buy is trying to avoid the fate of its rival Circuit City, which liquidated in 2009 after it struggled with the changing electronics landscape,” The Associated Press reported. “Sales of TVs, digital cameras and videogame consoles — once the bread-and-butter of electronics retailers — have weakened, while sales of lower-margin items like tablet computers, smartphones and e-readers have increased. The rise in competition from Internet rivals like Amazon.com and discounters like Target also has hurt electronics retailers.”
Best Buy is predicting a revenue of $50 billion to $51 billion for fiscal year 2013. The company employs 180,000 workers.
RENEE RICHARDSON may be reached at 855-5852 or renee.richardson@brainerd dispatch.com. Follow on Twitter at www. twitter.com/Dispatchbizbuzz.