Best Buy Will Cut Stores and Jobs Following Weak Numbers
Thursday saw Best Buy (NYSE: BBY) report numbers, and they were predictably weak for the fourth quarter in succession.
According to Reuters, the weak numbers will result in the world's largest consumer electronics chain closing 50 big-box stores, as well as cutting 400 jobs in corporate and support areas.
Net loss came in at $1.7 billion, or $4.89 per share, for the fourth quarter ending March 3, compared with net income of $651 million, or $1.62 per share the previous year. That means that, excluding charges, it earned $2.47 per share.
BBY revenue came in at $16.6 billion, missing Wall Streets estimates of $17.15 billion.
“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,” said Best Buy CEO Brian J. Dunn.
“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 across multiple channels while increasing points of presence, and to improve performance and profitability.”
On Tuesday, Wedbush published a research report stating that it believed Best Buy continued to drive traffic through increased promotional activity and value pricing, keeping sales at acceptable levels, but sacrificing margin. Profitability was also likely hurt by a continuing mix shift towards lower margin Apple products.
“We expect domestic growth segments to include Computing and Mobile Phones (iPhone 4S released in October, and iPads), Appliances, and online. Internationally, we expect a third consecutive quarter of comps declines due to macro uncertainty in Europe.”
Piper Jaffray said that it does not believes the sluggish sales trend and gross margin pressure from earlier in the year have abated. Guidance will also be a focus but will likely be messy due to several restructuring benefits and a change to the fiscal year end.
“BBY shares have rallied 14.4% since March 14, which we believe can be attributed to hopes for a major cost cutting initiative (e.g. store closures) or a change to the capital deployment strategy (e.g. increase dividend).”
There is much to ponder going forward for Best Buy, then. Will the jobs and store cuts really turn the chain around? What will the warmer months bring? Only time, and some smart moves from BBY, will tell.
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