Best Buy, which has been struggling with declining sales even as the world’s appetite for electronics keeps increasing, says it plans to close 50 of its “big box” stores, and emphasize newer formats.
The Minneapolis-based retailer posted a $1.7 billion loss for its fiscal fourth quarter, compared to net income of $651 million in the same period last year. (Results include adjustments related to previously announced changes in its European operations.)
Revenue for the period rose to $16.73 billion, from $16.26 billion in the year-ago period, but same-store sales for the quarter dropped 2.4%. With online retailers — most notably Amazon — steadily gaining, Best Buy says quarterly sales declined in the U.S. in its gaming, notebooks, digital imaging and television categories.
The company unveiled what it calls a “transformation strategy:” To cut $800 million by 2015, it says it will shut down 50 big-box stores, and focus on its strengths, which include mobile phones (up 20% for the quarter), connections (up 13%) and online sales (up 21%.)
That includes opening 100 U.S. Best Buy Mobile units, its small-format stand-alone stores, and plans to increase domestic online sales 15% in the year ahead.
“In order to help make technology work for every one of our customers and transform our business as the consumer electronics industry continues to evolve, we are taking major actions to improve our operating performance,” Brian J. Dunn, CEO of Best Buy, says in the company’s statement. “As part of our multi-channel strategy, we intend to strengthen our portfolio of store formats and footprints — closing some big box stores, modifying others to our enhanced Connected Store format, and adding Best Buy Mobile stand-alone locations — all to provide a better shopping environment for our customers.”
In recent months, the company has found itself increasingly described as the canary in the big-box coal mine, as observers try to predict which chains will best navigate the transition to an increasingly online world. Some analysts have written Best Buy off as “a showroom for Amazon.” And in the business press, predictions are dire: “Best Buy Closings Signal End of Big-Box Retail,” proclaims a Business Week headline; “Why Best Buy is Going out of Business…gradually,” Forbes declared recently. And the Wall Street Journal recently predicted, “Worst is yet to come for Best Buy.”
The company also says it will launch a Connected Store in the Twin Cities and San Antonio, a full-market test. Based on results from store pilots conducted in 2010 and 2011, Best Buy says these “at-scale” market tests are expected to be completed before the 2012 holiday season. These are remodeled stores, which “focus on connections, services and multi-channel experience through a total transformation of both the store and the operating environment.” (Connections stores include pre-paid and post-paid mobile phone handsets, video and broadband service activations.)
The chain also announced an expansion of its Reward Zone Silver loyalty program, including free expedited shipping, premiere access to sales events, a free house call from the Geek Squad, and 60-day no hassle returns and price-match policy.