Best Buy Unveils Transformation Plan: Closing Big Box Stores To Focus On Mobile

Shares are down in pre-market trading as investors sort through the consumer electronics giant’s latest earnings, and an ambitious plan to focus on mobile phone sales as it cuts total retail space. Best Buy says it will close 50 of its big box stores in the U.S. in the fiscal year that ends in February and remodel others to emphasise phone, video, and broadband services. Meanwhile, the chain will open 100 smaller Best Buy Mobile stores; it expects to have as many as 800 in 2016, up from 305 today. The chain also vows to “significantly improve the customer experience”: By the holiday season it will increase employee training and change compensation to offer “financial incentives for delivering on customer service and business goals.” All told, Best Buy expects to reduce its costs by $250M this year, and $800M by 2015. ”We intend to invest some of these cost savings into offering new and improved customer experiences and competitive prices — which will help drive revenue,” CEO Brian Dunn says. “And, over time, we expect some of the savings will fall to the bottom line.”

The changes come as the retailer reported a net loss in the three months that ended March 3 of $1.7B — down from a $651M profit in the period a year ago — on revenues of $16.6B, up 3.4%. The revenue figure was well below the $17.2B that analysts expected. But the net loss was largely due to one time factors including an impairment charge for Best Buy Europe and closing of UK big box stores. Adjusting for that, earnings per share came in at $2.47, easily beating the $2.16 that the Street expected. About 13% of Best Buy’s domestic revenues came from sales of entertainment, with sales down 21.0% at stores open at least a year. Same store sales of consumer electronics were down 4.2%, and accounted for 38% of domestic revenues. But mobile phone and computer sales were up 7.6%, accounting for 38% of the revenues. Best Buy has been struggling to compete with online retailers led by Amazon, but says that its own online sales will grow 15% this year and hit $4B in 2016.

Comments (36)

  • Great! Just what we need. More job cuts for the peons so the CEOs can get richer.

    Comment by amirite — Thursday March 29, 2012 @ 8:55am EDT  
    • Are you aware the box store is a failing model of a business right now as Best Buy is known as the showroom for Amazon? If Best Buy does nothing the entire chain will go under just as Circuit City did. In the short run jobs will be lost but in the long run jobs will be saved.

      Comment by Craig — Thursday March 29, 2012 @ 9:57am EDT  
      • Isn’t the mobile store going to be a s showroom for amazon, wire fly and other services who may offer those same phones for lower prices

        Comment by jay — Thursday March 29, 2012 @ 1:56pm EDT  
        • Nope the model of the store will most likely be just a section of the store you go to now with mobile phones. The stores most likely will be very small most likely the size of the Apple store or Verizon.

          Comment by Craig L — Thursday March 29, 2012 @ 2:19pm EDT  
      • Only their selves to blame, maybe if they were a little more proactive on training their employees to deliver great customer service instead of simply following you around like a zombie, or trying to shove a cell phone plan down your throat when you are looking to buy a movie, cd, tv or computer then they wouldn’t be in the mess they are in. Best Buy has the worst CS of any of the big box stores. Their employees are mis informed and dont even know their own policies. Try using one of those disney movie rewards coupons sometime, you get the third degree, they give every excuse in the book not to accept the coupon, even though the coupon is mentioned in their ads, and the policy says they accept manufacutres coupons as a form of payment. 9 times out of ten customers either walk away not able the use the coupon or have to argue for 30-40 mins before the dummy cashier or manager realizes they are suppose to accept it.
        And dont even get me started on their illegal forceing you to give your id for a returns with reciepts and storeing your private DMV personal information which is protected by federal law.
        Their are several lawsuits over that bs right now in fact.

        Comment by hollywood929 — Friday March 30, 2012 @ 2:59pm EDT  
        • you mad bro? sounds like you had one bad experience and have proclaimed yourself as the CEO of hate best buy club.

          Comment by mac — Saturday March 31, 2012 @ 10:56pm EDT  
    • Ever shop there yourself? Organized a boycott? If you have a problem with big business do something other than bitch about it.

      Comment by Anonymous — Thursday March 29, 2012 @ 10:27am EDT  
    • Best Buy is known as Amazon’s show room they had to make these changes or they would have gone the way of C. City. Yes jobs will be lost but the company might be saved.

      Comment by Craig J — Thursday March 29, 2012 @ 12:10pm EDT  
  • who needs another phone store ? They might as well just close up. Their staff needs training not only on products , but customer service. They’re the worst

    Comment by joe — Thursday March 29, 2012 @ 9:15am EDT  
    • I am an current employee of best buy and am currently an IT student going to school for computer networking and forensics. When I read people need training it makes me cringe. Yes some of our employees do need a little more knowledge, but for those who do, it makes us feel like trash. Most people I deal with want to be right but I give them the straight up facts on what this computer is capable of handeling and whatever else if it meets their needs. Im sorry but you cant game on a $350 Pentium laptop. When you the consumer does not like what you here you flip out. So please, either read some before you come in, or if you actually get a specialist listen to what they say. There is no commision involved, i’m just there to make sure you get a laptop to do what you need it to do.

      Comment by Anonymouse — Thursday March 29, 2012 @ 10:55am EDT  
      • The Best Buy I trade at does a very good job with customer service, as well as inventory. The staff are friendly, and I enjoy walking around and actually SEEING and TOUCHING the merchandise I am purchasing. It appears as though the business is so marginalized that it is no longer viable to have a brick & mortar operation.

        It would be interesting to examine a Best Buy profit and loss statement, paying particular attention to executive compensation. The contemporary trend is to continue to give upward compensation packages to executives; lower staff overhead, and somehow expect the customer satisfaction index to improve. Oh…and increase sales.

        Comment by Dr. Zillman — Thursday March 29, 2012 @ 1:13pm EDT  
      • Sorry but you are wrong especially here in L.A. 99 percent of best buys floor staff are obnoxious and they have no clue what they are doing or talking about. Try asking them to find something their computer shows in stock, and see what kind rolling eyes and excuses as to why they arent able to look you get, and then instead get a sales pitch for a cell phone.

        Only time i shop at best buy now is if they have an exclusive movie that no one else has, that i know i wont want to return. I refuse to give them my personal License info to store in their data banks.

        Comment by hollywoodman929 — Friday March 30, 2012 @ 3:07pm EDT  
  • So much for putting in an app here. The rich get richer & the rest of us get screwed.

    Comment by Mickie — Thursday March 29, 2012 @ 9:16am EDT  
    • Did you even read the column? BB is losing money. Not everyone is out to get you. Don’t flatter yourself.

      Comment by Ivy — Thursday March 29, 2012 @ 1:56pm EDT  
  • I’m all for the restructuring.
    One thing they should get rid of is the big appliances such as clothes washers and fridges. Takes up too much floor space.

    When I think of Best Buy I don’t think of appliances, I think of movies/video games/computers/phones and TV’s.

    Comment by ZGood — Thursday March 29, 2012 @ 9:19am EDT  
    • When I think of best buy, I think of lots of untrained, rude, and uninformed teens who spend most of their time avoiding being helpful. I’ll never shop there ever again (nor online).

      Comment by Scott — Thursday March 29, 2012 @ 9:55am EDT  
  • @ ZGood…. I agree. When I heard about their loss leader perspective on movie software changing (i.e. third party handling) I said “why are these doors even open? There is nothing to drive folks in. Are idiots really buying phones in these numbers?” Guess I got my answer. I can only see movie software being downgraded even more with these current me even less of a reason to go.

    Comment by Anthony — Thursday March 29, 2012 @ 9:46am EDT  
  • Use to like Best Buy, nice place, lots of stuff. Lately, they don’t seem to know who/what they want to be. Still a nice place, not as much stuff (at least that I want) and the prices can be found same elsewhere. So what is the point of Best Buy? Going the way of Circuit City?

    Comment by RPF — Thursday March 29, 2012 @ 10:28am EDT  
  • Bye bye Best Buy. Who goes to them for mobile phones?!

    TVs, computers, electronics, yes. But phones? Go to the service providers for those.

    Too bad. Best Buy was the last one standing for electronics.

    Comment by wg — Thursday March 29, 2012 @ 10:48am EDT  
  • Best Buy absolutely sucks. One of the worst, no question. But, there are no more consumer electronics stores. Luckily I live in NYC so I can go to the vastly superior J&H or PC Richard’s. but Best Buy was always my rock. Not to mention they’d pricematch Amazon sans shipping costs…Poor bastards; anyone who wants them to stay open should invest in a few $180 gold-plated HDMI cables.

    Comment by Erik — Thursday March 29, 2012 @ 11:04am EDT  
  • Where am I to browse my Amazon purchases?

    Comment by bob loblaw — Thursday March 29, 2012 @ 11:16am EDT  
  • And end of an era…

    I used to buy all my cd’s from Best Buy.

    In some ways they felt like the last record store… yeah sure I could still go over to Amoeba and spend double the price on a CD, but I’m not Daddy Warbucks.

    Comment by Little Annie — Thursday March 29, 2012 @ 12:13pm EDT  
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