Will Best Buy close more stores?

The beleaguered retailer, hit hard by 'showrooming' and fierce online competition, has few cards to play and may make an announcement Tuesday.

By Jonathan Berr Nov 12, 2012 3:24PM
Credit: BRENDAN MCDERMID/Newscom/RTR
Caption: People walk past a Best Buy store in New York in August 2012The question isn't whether Best Buy (BBY) CEO Hubert Joly will announce more store closings and layoffs during the beleaguered retailer's analyst day Tuesday but how many and how soon. He has little choice.

Best Buy, based in Richfield, Minn., has announced two rounds of store closings, and influential retail analyst Stacy Widlitz argued on CNBC.com Monday that "investors would simply like to see more on the way." It's easy to see why. Best Buy has about 1,062 U.S. stores, up from 923 in 2008. Same-store sales, a key metric, have slumped in eight of the past 10 quarters. The retailer recently said comparable sales would continue to fall in the next quarter.

According to Reuters, Best Buy generates about $302,800 per employee in revenue annually, well below the industry average of more than $132 million. The company employs about 170,000 people. Of course, this trend is unsustainable. The question is what can Best Buy do about it.   

Best Buy and other brick-and-mortar chains are trying to combat "showrooming"-- shoppers who look at merchandise in physical stores and later buy online at a discount. Investors have to be concerned about whether the retailer will "give away the store" with free shipping offers and by slashing prices to compete against rivals ranging from Amazon (AMZN) to Wal-Mart (WMT) to hhgregg (HGG).

Investors were heartened by the company's new chief financial officer, Sharon McCollam, who is credited with helping turn around Williams-Sonoma (WSM) by shrinking the company's store count. Though McCollam is confident Best Buy can improve its fortunes, skeptics abound. For one thing, its rivals can easily cut prices to match or exceed whatever Best Buy may charge. Then there's the buyout being pushed by company founder Richard Schulze.

Whomever runs Best Buy will be tasked with improving the company's ecommerce business.  Last year, the company said it would double annual online sales in five years. Even under a best-case scenario, that's going to a tough goal to achieve. Turning around Best Buy will be even harder.

--Jonathan Berr does not own shares of the listed stocks.  Follow him on Twitter @jdberr.


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145Comments
Nov 13, 2012 12:30AM
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The workers are slaves from other countries who generate the higher profits, not american workers who command a higher wage. The products are made in other countries, the workers are from other countries, even the business is owned by the foreign countries, So , when a purchase is made in the USA, the money goes to the  foreign country. When the american buyer dips into his bank account to make a purchase,  (since he doesn't have a job)  the money is spirited out to the foreign banks. fort knox will soon be empty.
Nov 12, 2012 11:32PM
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I bought a laptop through their online site.  There was a problem with the order and the 800 number was no help at all.  So, I go to the store to see if they can help me.  The web site says Best Buy, the store says Best Buy, but if you buy something online the store can't help you.  I cancelled the order when I went home and bought my wife's laptop from Office Depot.  My laptop started shutting down on me before the warranty was over, so I took it to Best Buy.  They said it had a virus, which isn't covered under warranty.  They did all their little magic, told me all was well and charged me over $100.  Less than  hours after I get my computer home it is shutting down again, just like somebody hit the power button.  So, I contact HP, they walk me through the usual, and the guy decides there is a hardware problem.  He sends me a box Fed Ex and a week later I have my computer back.  It wasn't a virus, it was the thermal overload thermistor that had gone bad and was shutting my computer down because it was getting a false overtemperature indication.  Best Buy would not refund my money for a false diagnoses that did nothing to correct the problem.  Their policy of making you check out computer products through the Geek Squad and subjecting you to their high pressure padding tactics is aggravating and insulting.  I can't begin to tell you how many times I have been totally ignored in a Best Buy store.  I don't use them to decide what to buy online because I can't stand going in their stores.  Retailers who don't take care of their customers deserve what happens to them.  I just feel bad for the employees who are hurt by management's failed policies.
Nov 12, 2012 10:55PM
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I thought obozo was creating jobs?  Sure doesn't look like it and more to come under this non-citizen so called president.  Needed to steal the last election to become dictator-in-chief but, illegal as he is and those who voted for the illegal citizen, soon to come judgement against a nation that booed God and kills 56 million babies and accept a immoral life style, you get what you want, hope you can take the heat?
Nov 12, 2012 10:37PM
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Best Buy's only hope for salvation would be to pay enough to hire employees that know what the hell they are talking about.
Nov 12, 2012 10:31PM
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Best buy and other electronics retailors are dying thats all there is too it. Just like antique shops in the early 2000's. When Ebay came out antique shops died simply because that item that was rare and expensive now is on ebay for 10 dollars and there are thousands out there. Its the same with best buy. Amazon,deep discount and other online stores are killing them. So what can best buy do about it ? Here is the answer

 

1.) Shrink the products, nobody really buys car audio anymore so get away from that it was cool in the 90s but not many people buy speakers and subs anymore. Keep some product but really cut it down. Get rid of the musical instruments its not worth the cost and its losing money.

2.) The tvs and home audio are fair priced they are comparable to walmart and online sites ( ive done the research) So push that forward.

3.) Re-organize the stores- Bring the Tvs and audio upfront make it the forfront of the store. Have couches and tables let people enjoy. Give demonstrations of the tvs with audio differences etc.

4.) Move the Blurays and dvds to the side of the stores not the front.

5.) make it known that you price match online stores !! Most people dont know this.

6.) Stop wasting time on selling 75 types of laptops cut it down.

7.) Nobody is going to spend 500 dollars on beat audio headphones demand cheaper yet quality items. Beats are not worth what they cost.

 

Best buy- You are the best electronics store around. You have to get back to what you were good at. Offer the same options that you used too. Best buy used to let you literally bring a defective product in and exchange it out for a new one on the spot. I loved that. That is why I would buy from them. Not walmart who takes a month to send it off. You know what I cant keep going I give up. I could fix Best buy but they wont listen to avid consumers like me. I go there twice a week and thats down from 4 times years ago.

Nov 12, 2012 9:58PM
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When I have to spend $30 at "Best Buy" on a cable that I can get on Amazon for $3, I can see why they have a problem. Greed is the problem. People don't buy there because they know it's not the "Best Buy", and usually not by a long shot. If they lowered their prices to make a REASONABLE profit, they would see their sales go through the roof! People are tired of getting raped and are getting wiser that there are far better prices being offered by competitors. Change your business model to be a "Good Guy" business or become just a memory.
Nov 12, 2012 9:50PM
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Employees who are aloof, not knowledgeable, and have the attitude that you are are just "small potatoes" when you just bought $1000.00 of stuff (even though they don't get commission); managers who think that they are "God" compared to you because it is "their" store, and who expect an apology from you for taking "their" time when you have a problem with the operation of "their" store; corporate who has NO IDEA what real technology is and sell merchandise that might, just might, be suited for twelve year-olds and the technologically unsavvy at twice the products' value.......these three things are why I don't shop at BB unless I need something simple in a pinch. It has nothing to do with "showrooming" and competition. Have a great product and knowledgeable and helpful staff and people will pay higher for it. It's better to have fewer customers willing to pay more than having mass customers who want cheap crap and a warm body to sell it to them. Best Buy does have one thing going for it, though.....at least its electronics are better than Wal-Mart's. 
Nov 12, 2012 9:00PM
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 Purchased a washer from Best Buy several weeks ago. Best Buy's price was less than anybody online. I had to pay sales tax which put the price a little over online prices. But, Best Buy delivered and set up the new one and took the old one with them. No charge. All I had to do was put the clothes in and push the button.
Nov 12, 2012 8:10PM
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I purchased my entire kitchen full of appliances through them a few years back. After paying them off ahead of schedule, I bought 2 air conditioners due to my central A/C failing.

I was never late on a payment, always paid mre than the minimum, and had no prior problems.

They decided to change my monthly due date a few days ahead, without my consent, and made me late on ONE payment. When I questioned them on it, they claimed they "can not reverse a late fee".

I paid off the balance immediately and never did business with them again.

They are failing due to their own practices, and I could not be happier!

Best Buy, YOU SUCK!!! 

Nov 12, 2012 8:10PM
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Their prices,too high,their customer service,non-existent,their selections,poop,they're not keeping up with the times and have nobody to blame but themselves.
Nov 12, 2012 8:01PM
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Best Buy Your Day Is Over.  Close the doors already!
Nov 12, 2012 7:14PM
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After reading  half the posts here I have decided if Best Buy wants to get out of the red what they should be doing is selling dictionaries and thesaurus !!
Nov 12, 2012 6:53PM
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   Personally, I haven't had any real bad problems or business with Best Buy!

I'm not gonna try and remember some very minute slight or snub and make a mountain out of it. Some sissy folks on these comment pages just can't wait to go into their "victimhood whine", so as to have something to cry about. I hope BB adjust to the economy, and stay relevant enough for me to keep coming back.

   I've bought a desktop, computer securities, 3 Dynex TVs, a great printer, inks, and many DVDs from Best Buy.

  Gonna go there on Black Friday and maybe buy a new 50+" TV, and more DVDs! They have some great prices, products and good service at their West Paterson, NJ store-- where I've gone for about 8 years.

America, quit your imaginary whining...!! Example: Some idiots bringing up POTUS Obama's name, so as to get their infantile, political talking point in. Pathetic!

Nov 12, 2012 6:47PM
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I went in the Best Buy store in my area. I was looking for an extra battery for my digital camera. They have on display and sell the exact camera I have, but don't stock the batteries for them. I got one off of Amazon. Goodbye Best Buy. I don't need you.
Nov 12, 2012 6:45PM
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This doesn't surprise me at all. Ironically Best Buy very rarely has the best buys.

I was shopping for a new radio/CD player on my birthday a few years ago and I went all over town, checking every price, trying to find the best deals.

Guess what? Best Buy was not only not the best deal, they were the worst! They oversold the other stores by over $15. I ended up buying it at Sears instead.

And as if that's not enough, their employees are rude and annoying. Seriously, I can't spend more than 5 minutes in a Best Buy without, like, 3 different employees rolling up asking if I need help, as if I'm about to start stuffing phones in every orifice and running out of the store.
They're so suspicious and really obvious about it.

That's why they're crashing. They're expensive and annoying.
Nov 12, 2012 6:43PM
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I have not shopped at Best buy since 2000. I purchased a car stereo for my wife's car and it died within 2 month's. When I took it back, I was told I would have to pay to have it taken out and shipped to be repaired. When I told them that the salesperson assured me that anything wrong would be taken care of in house, the person told me that I was misinformed and there was nothing he could do. The kicker is when I told them to just put it back in the car (he had already removed it) he put the cd that was causing the problem back in the player! Poor customer service will kill any business. I am not sad to this poor excuse of a retailer go by the wayside.

 

Nov 12, 2012 6:41PM
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They don't have enough people to help the customer, not to mention, opening the doors at 10 am seems a little late in the day.  The prices are high on many of things they have to offer.  However, it is one of my favorite stores to shop for tv's, printers and other electronic toys.  My suggestion would be for them to open the doors at 8am, pay the sales people commission on sales, cross train all employees to handle the entire store, 

Nov 12, 2012 6:17PM
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so happy to hear they're going down the crapper. i bought a computer there in 1998 and paid $400 for a 4 year extended warranty which said if it had to be repaired 3 or 4 times that they would replace it. it broke at least half a dozen times and they wouldn't honor their warranty so screw you best buy that's what happens to stores that treat customers badly/unfairly.
Nov 12, 2012 6:02PM
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i remember buying a computer from them i had a warranty i was told it could be three things all covered under the warranty then i get there they wanna charge me 200 dollars and ship it to dallas and calling over there ihad to go through the 1800 because their phones werent working for several months maybe lousy customer service finally caught up with them
Nov 12, 2012 6:00PM
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Wait a minute is that a correct figure?

"Best Buy generates about $302,800 per employee in revenue annually, well below the industry average of more than $132 million"

So what they are saying here is each employee in the big box stores genrates 132 million in sales and most are working for 8 bucks an hour!

 

Wow just wow.

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