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 12, 2012 5:31PM
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also we need to remember the crap fest that was their Black Friday special last year
Nov 12, 2012 5:25PM
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I happen to like Best Buy. They have always been very helpful since I am "technology challenged." I have never had a problem returning an item. The problems that they are having financially, I feel, is that they open to many big box stores. More is not necessarily better. I would rather see a bigger store with more employee's than many stores that are understaffed. If you give good service, an assortment of products and competitive pricing, I will drive across town to shop as I am a loyal customer to "good service." Another important thing for me is a return policy. I hear horror stories all the time from people that puchase online, want to return the item and then it takes months to get their returned purchase credited back to their account. I have purchased maybe 3 items online in my life.
Nov 12, 2012 5:16PM
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Wait, wait!  How can this be?

 

We just re-elected a prez that according to voters is doing a good job on the economy, and the "middle class is doing fine!"  If anything, Best Buy and ALL retail chains that sell goods made, shipped from, and sold by CHINA and JAPAN to us here should be hiring MORE workers!!


After all, the economy is booming, isn't it?  This writer's got it all wrong.

 

Sincerely,

 

A dis-satisfied voter and customer.

 

Nov 12, 2012 5:10PM
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Fact:  WALMART IS TAKING A LOSS ON ELECTRONICS to put Best Buy out of business.  But Walmart will rise prices when they control the Market.  Then go on and take a loss on the next product to put everyone out of business. EVIL.  
Nov 12, 2012 5:03PM
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BEST BUY is THE WORSE RETAIL STORE IN THE WORLD. GOOD FOR CD'S OR GAMES MAYBE BUT THAT'S IT!!!!!!!!!!
Nov 12, 2012 4:58PM
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Perhaps the CEO might get a clue and decide to treat the employees better and cater to the customers if they want to save their company. This isn't rocket science.
Nov 12, 2012 4:36PM
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Only idiots buy something from bestbuy expecting help inside the store though.
Nov 12, 2012 4:16PM
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Not that I want these people to lose they're jobs but Best Buy stinks. I went in to ask about a specific laptop option that is on they're website and I talked to about 5 people and no one knew what the hell I was talking about. I also inquired about they're buy back program for laptops. I showed them the laptop I bought from them a year and a half prior for about $700. They wanted to give me $67 for it. What a joke. I won't be shopping there again.

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