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 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.

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.

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 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 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 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 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 6:17PM
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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 6:43PM
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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 6:45PM
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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 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 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 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 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 8:01PM
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Best Buy Your Day Is Over.  Close the doors already!
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 13, 2012 11:14AM
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Best Buy laying off and closing stores, JCP on it's last gasp and falling, Hosetess Brands closing factories and first wave of layoffs sending 672 to the unemployment line, Sears Holding that owns Kmart will most likely be closing stores after Christmas, and Supervalue struggling to stay alive with the drag of their Albertson's division. impending layoffs in defense, and the fiscal cliff.. January looks like a dismal month for the market.
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 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 4:36PM
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Only idiots buy something from bestbuy expecting help inside the store though.
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