Will store closures help save Best Buy?
The ailing electronics retailer's plan to shut 50 US locations may be wise financially, but giving up on 'customer experience' is very risky.
Retailer Best Buy (BBY) was at the heart of the home electronics revolution that swept America in the 1990s. Computers became staples of businesses, video games became big business, and TVs boasted bigger and better pictures.
But the technological revolution that delivered tremendous sales to Best Buy kept churning along after Y2K and ultimately left the brick-and-mortar retailer behind. A failure to adapt to online competitors that sold more at lower prices has been weighing on the big-box store's sales for some time.
Thursday, Best Buy made its biggest admission yet of its failure to remain relevant, and it's looking to get back in the game. The company announced the closure of 50 larger stores and plans to open 100 smaller ones, amid mixed earnings results that might signal BBY is turning around at long last -- if it doesn't tick off customers in the process.
Admittedly, the earnings numbers are pretty ugly. Best Buy lost $1.7 billion in its latest quarter, thanks to some big one-time charges. Adjusted earnings actually beat expectations, but that's after the retail giant had missed Wall Street's estimates in its past two reports. Best Buy had also posted four straight quarters of year-over-year earnings declines before the most recent report.
But if you back out the charges this time around, there are reasons for optimism. Holiday sales were impressive and were a huge improvement over those of previous years. Best Buy tallied earnings per share of $2.47 in the fourth quarter, up 25% from 2011, and full-year EPS were up 6% over the previous year.
So is the retailer really turning around? It's hard to say. At the very least, Best Buy has admitted the need to change, with moves such as:
- $250 million in planned cost reductions in the next year and $800 million in cuts by fiscal 2015
- Closing 50 big-box stores in the next year
- Opening 100 U.S. Best Buy Mobile small-format stores in the next year
In short, Best Buy is getting smaller, both in its big-box operations and in its physical store sizes.
But there's a huge risk here. Buried in Thursday's report is a plan to save money through "reductions to fund investments in enhanced customer experience and growth initiatives." In short, Best Buy is going to give up on some efforts to improve customer service and create a more welcoming store environment in favor of cutting costs.
That's a huge gamble. Most consumers shop online because of the price benefits, but surely many shoppers also turn to the Web because they hate waiting in long lines or dealing with unhelpful employees in big-box stores.
Best Buy certainly may be showing signs of a turnaround on some metrics, but Wall Street appears to be clearly in the wait-and-see camp.
But if Best Buy cuts costs at the expense of its customers, no amount of right-sizing is going to save this company.
Jeff Reeves is the editor of InvestorPlace.com, and the author of The Frugal Investor's Guide to Finding Great Stocks. Write him at firstname.lastname@example.org or follow him on Twitter via @JeffReevesIP. As of this writing, Jeff did not hold a position in any of the aforementioned securities.
MORE ON MSN MONEY
VIDEO ON MSN MONEY
The outcome of Best Buy is a perfect example of what is wrong with Corporate America today.
In Best Buys case, you had a new company providing exceptional service with knowledgable staff and a goal of providing customer service and satisfaction. Enter CEO's wanting a HIGHER stock return so that they can justify their millions of dollars bonus and they start messing around with the formula for success that initially made Best Bys one of the most profitable companies ever. They implement a plan that "lays-off" all the knowledgable staff earning a decent wage and then hire back, (at a lot lower wage) employees that know absolutely nothing about Best Buy or it's products. Factor in sales tactics that over promise and under deliver (Christmas 2011) and what you have is a new formula for failure. Corporate greed IS what is wrong with Corporate America. CEO's getting paid millions of dollars for running viable companies into the ground IS what is wrong with Corporate America. What does a CEO do for a company anyway besides rake in millions of dollars? Sit on their fat pink asses raking in millions of dollars, sucking up caviar and single malt scotch while running the company into the ground then moving on to the next company. I call them parasites because that's exactly what they are.
Best buy is an overpriced whorehouse for people that don't know any better about computers and electronics. Their computers are full of spamware and their accesories are 30 times the price they should be. For example, I needed a HDMI cable and a SATA hard drive cable for a couple of projects I was working on. $29.99 for a 6' HDMI cable!?? $21.99 for a 12" sata cable!!!?? What planet are you on? I ordered them off amazon for a couple of bucks. I know a guy that took his computer to "Geek Squad" to get fixed and payed almost as much as the computer cost. Shop amazon or New egg for computer hardware and if you want a big box computer (Gateway, Dell) just buy it factory direct or better yet, build your own, its really easy.(literally) New tv? I see better deals at Wal*mart and Target, and yes they carry the same brands and they are brand new and no different then Best buy. Best buy sucks and you always have to wait an hour for help or even to get checked out. Good riddance!
It is definitely the total lack of customer service and sometimes just rude employees causing the closures of Best Buy. I have written to the corporate office and my complaint is posted on yelp and on their site. Even the corporate agreed I was treated badly but even they offered no incentive to intice me to ever to return to one of their stores. Sure they are going to talk to the manager - Big Deal! I will NEVER walk into one of their stores again even if they are giving the stuff away. And YES - the day I was treated badly, I went right home and bought the items online from another retailer. I sincerely hope the Best Buy I was in is one of the first to close.
Best Buy has also lost many customers due to its absolutely terrible customer service. Even managers stand around talking about trivialites while customers are waiting for help. Many of the workers are rude and not at all helpful or knowledgeable.
To echo some of the other sentiments and to impart some wisdom
If you have a job in this economy, consider yourself lucky. When I worked at McD's, I started out at $3.35 an hour and it was hard work; I also had to deal with irate customers and managers that were about as useful as a rubber crutch. But I never, ever took it out on a customer. It was not theri fault. They came in to the store willing to spend their money and provide us with business. They deserved service and repsect and that's what I gave them, even at my crappy wage.
I've held many jobs since then, put myself through college and have worked my way up over the years to become a white-collar professional. No matter what I've done or where I've worked, whether it was a desk job, a restaurant, or a print shop, my mantra has always been: A satisfied customer made my paycheck possible.
One of the reasons Best Buy is failing....very poor customer service. They hire inexperienced sales people; who unfortunately, do not know how to answer customer's questions correctly.
I have been to the Clearwater, Florida, Best Buy on several different occasions.
It took the salesperson over 90 minutes to register and activate a cell phone; if I didn't need to have the phone that day...I would have left. I had to return the following day; because there was a problem with the cell phone. That took almost ANOTHER 90 minutes. As I waited for this matter to be corrected; I noticed how other customers were having to wait just as long; not only in that particular department; but also in other departments as well. Two of the employees where I was waiting; never had an answer for their customers; they had to constantly ask the one young lady, (who WAS helping her customers), then also having to call for assistant managers from other departments. I asked the young lady if these employees were new.....she said no....actually they had been hired before her. Best Buy took advantage of their customers for years; over-charging on low-quality products, pushing service agreements that were costly, and not giving the "great" customer service they would boast upon having. Greed from these corporate companies is usually what does them in at the end......honestly, couldn't happen to a more deserving company.
Worst Buy, I stopped shopping there years ago, prices too high, customer service a joke.
Copyright © 2014 Microsoft. All rights reserved.
Fundamental company data and historical chart data provided by Morningstar Inc. Real-time index quotes and delayed quotes supplied by Morningstar Inc. Quotes delayed by up to 15 minutes, except where indicated otherwise. Fund summary, fund performance and dividend data provided by Morningstar Inc. Analyst recommendations provided by Zacks Investment Research. StockScouter data provided by Verus Analytics. IPO data provided by Hoover's Inc. Index membership data provided by Morningstar Inc.
[BRIEFING.COM] The stock market began the new trading week on the defensive note with small-cap stocks pacing the retreat. The Russell 2000 (-1.4%) and Nasdaq Composite (-1.1%) displayed relative weakness, while the S&P 500 lost 0.8% with all ten sectors ending in the red.
Global equities began showing some cracks overnight after China's Finance Minister Lou Jiwei poured cold water on hopes for new stimulus measures. Specifically, Mr. Lou said the government has no plans to change ... More
More Market News
|There’s a problem getting this information right now. Please try again later.|