For some time now, Best Buy enjoyed the title of being the world’s largest consumer electronics retailer. It had successfully emerged from the slow market of the past years, to find itself in trouble at a time when the overall economy is recovering and consumers are back spending their paychecks. Best Buy has to shut down 50 stores in an attempt to cut costs by $800 million.
Apparently, Best Buy’s troubles started with the holiday shopping spree which although produced sales it failed to cover the costs of the huge discounts everybody was throwing around at the time. And Best Buy wasn’t the only company to make a compromise in favor of huge discounts just to keep selling, so chances are other popular stores will have to handle similar cost issues.
For the holiday quarter, Best Buy managed to stay within Wall Street estimates, but that wasn’t enough. Bloomberg analysts estimated $17.1 billion revenue, but Best Buy only managed to score $16.6 billion for the quarter that ended at the beginning of the month. For fourth quarter, Best Buy had a net loss worth $1.7 billion at a net income of $651 million.
The staggering costs have prompted Best Buy management to come up with a plan to save $800 million in the next three years. Part of the cost reduction plan is shutting down 50 big box stores across the United States and 400 jobs in corporate and support divisions.
Chief Executive Officer Brain Dunn said: “Our intention is to leverage our square footage and have more distribution points for our customers. We’re clearly going to have more doors and less square footage”.
Part of Dunn’s plan is also expanding the network of Best Buy Mobile Stores by 2016 to 600 to 800 outlets, almost double than the present day number.
With Dunn operating such costs, chances are investors will soon begin looking at him with scrutiny. However, Dunn believes he is “the right person to lead the company forward”. “I’m really not spending a lot of time looking in my rearview mirror. I believe wholeheartedly in what we are doing. I know that we can create an experience that is second to none for our customers” he said.