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Best Buy to cut 400 workers to save money

Best Buy may have dominated its former competitors to the point where Circuit City went out of business, but it appears Best Buy itself is now under pressure. The electronics giant recently offered up its financial details and among the profits and losses was a tidbit that the company intends to save $800 million in costs.
Some of the cost savings will come with the closure of 50 retail stores. Out of that $800 million, Best Buy wants to save $250 million during the first fiscal year. Not all the savings will be from the closure of retail locations, Best Buy also plans to use information technology to make its support structure more efficient and eliminate 400 positions in the corporate and support workers.
Best Buy currently has 1,100 big-box retail stores.
While it plans to close 50 big-box retail locations, the electronics giant is also planning to open 100 additional Best Buy Mobile small format standalone stores. Some key big-box retail locations will also be redesigned into the so-called "connected store" formats that focus on selling mobile phones and activating video and broadband services. The retail giant also hopes to increase its domestic online sales by 15%.
The latest financial details are for the quarter that ended on March 3 and Best Buy posted a $1.7 billion loss working out to a loss of $4.89 per share compared with a profit in the same quarter of 2011 of $651 million. Some of the loss in the current quarter is attributed to the $2.6 billion in restructuring costs and other charges Best Buy took.
If we ignore restructuring costs and other one-time fees, Best Buy actually posted a profit better than Wall Street predicted at $2.47 per share. Best Buy is projecting earnings of between $3.50 and $3.80 per share for the new fiscal year with revenue of $50 billion.

Source: WSJ

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Having worked for this company....
By rudolphna on 3/29/2012 3:43:26 PM , Rating: 2
I can tell you that the 50 stores that are being closed are not necessarily the ones that aren't busy. They are the ones that they do not "Attatch" When I worked for them, this is how the stores operate.

These numbers are different for each individual store
For each $100 in revenue that is generated.....
$25 is supposed to be accessories
$8 is supposed to be "Black Tie Protection"
$3 is supposed to be services (PC Setups, etc)
$15 is supposed to be "content" (DVDs, CDs, Games, itunes cards, etc)

That is broken down by department, by store, and by district. If a department isn't hitting these goals, the employees in that department are chastised, and the managers will literally watch their every move. They don't care about whether or not the customer ACTUALLY needs it. They ALWAYS need it.

For example, if you went in to buy a new laptop, they WILL ask you if you would like to purchase a wireless printer. Even if you tell them that you just bought one, most of them will press you on it. They look at it as "You ALWAYS need accessories to go along with it" They will ALWAYS show you the "Monster" HDMI cables before the rocketfish ones which are a fraction of the price (and still overpriced).

Profit margin on a lot of things is ridiculous. Let me put it this way, when we bought our new 55" Samsung TV, we had to buy 3 HDMI cables. They were 12' Rocketfish cables, and retailed for $99 each. I got all 3 for less than $20, with my cost plus 5% discount (which has changed since then).

RE: Having worked for this company....
By Veero on 3/29/2012 4:16:37 PM , Rating: 2
I too worked for Best Buy until recently, and honestly, the reason why cables and stuff like that are overpriced is because there is no margin anywhere else now-a-days. They make little to no money on selling laptops, TVs, ect... True back in the day, or even just a few years ago they made a decent amount of profit off of those main devices, but those days are gone.

RE: Having worked for this company....
By mcnabney on 3/29/2012 5:23:28 PM , Rating: 3
A popular lie.

While the margins on accessories and cables are well over 100% don't believe the falsehood about razer thin margins on everything else. They make 20-100% on TVs, appliances, and other electronics.

For example, a buddy of mine does custom home theatre installs and I recently bought a Yamaha A710 receiver from him. He sold it to me at his cost (because he is such a nice fella) which was $380. Best Buy sells them for $600. I also imagine that Best Buy gets a much better price from Yamaha due to how much they order. So their markup is at the very least 50%.

RE: Having worked for this company....
By guy4 on 3/29/2012 7:30:29 PM , Rating: 3
I don't think it is a lie. He just wasn't specific enough. There is pretty terrible margin on a lot of home electronics compared to other retail items. It is simply that the terrible margin doesn't extend to every piece of equipment.

The general rule of thumb is that accessories are marked up at Best Buy and focus items like t.v.s and computers are set at a low margin to be attractive in ads. I worked at BB for roughly 6 years and margins were almost never over 20% on computers and sale items were often sold at a loss.

There are, however, some items that are "electronics", but still are marked up. Home stereo equipment, musical instruments, and home appliances are good examples of things Best Buy profits from. Your example falls here.

A good way to consider it is that Best Buy probably isn't making money from a Samsung TV or Toshiba laptop in their add. They are likely making money from products that are in the store but don't grab people's attention or drive store traffic.

This is all supposing that you care about a business making money. I don't really. That is what businesses do. I want to be able to shop at a place where I can see what I am buying and maybe touch it. I am willing to pay a little more for that convenience. I'm just smart about not paying too much for that service.

RE: Having worked for this company....
By vol7ron on 3/29/2012 11:00:28 PM , Rating: 3
well over 100%

When did you work there? When I worked at best buy, albeit a short period in time a long time ago (they still had PDAs), accessories were marked up several thousand percent.

Those leather phone cases were being sold at $30-40, when the employee price (still over cost) was $2-3. That's a hell of a mark-up. Cables were similar. Large ticket items (aside from car audio), have always had a low mark-up. I imagine the mark-up on Apple products are also low.

And if you went into a Best Buy near me, and went to "buy a laptop", you'd be waiting half an hour. Sure the employees don't work on commission like Circuit City did, but you're right, they are pressured to sell.


It's the bad employees that don't recognize when they're being a nuisance that upset me.

- Yeah, I don't want your $60 replacement plan for something that cost me $200. That's 1/3 the price and if it breaks, I'd rather buy the next, newer version, than still pay money on top of that $60 just to get the replacement.

- No, I don't want your credit card, recognize that I'm paying with a credit card, I know what one is, and I'd get yours if I cared.

- Why do you need to take my ID and type numbers when I'm paying?

- Can't you tell I could have ordered online and had it delivered by the time I find someone to get my stuff off the shelf and then go through checkout

- Yeah I see you sell soda and candy at checkout.. I also question how long it has been sitting there, since I have never seen anyone else buy it

- Thank you, 3 security guards at the front desk that have to check my bag, even though the register is right next to your booth

- Thank you, 3 security guards at the front desk that have to check my bag when I'm bringing something back to return

By rudolphna on 3/30/2012 12:04:47 PM , Rating: 2
In order

-Some people (like me) actually find those replacement plans worthwhile. Especially the accidental plans. If you break it, you get it fixed, or more likely, get a new one. How about the $130 plan on something that cost $600? I'm not defending the people who don't know when to stop (But they are after all, only doing their job, and if they don't, they will be screamed at for an hour by a manager)

-Same thing as above. Every day stores have a quota for number of credit card applications. They aren't doing it to annoy you, they are doing it because if they don't, they will be screamed at and lecturedl

-If you are paying with credit card, and the signature is not legible, you are supposed to check ID and type the last 4 digits of your card. Sometimes also the driver license # is required for certain items, it's just the way it works. And not just at Best Buy.

-Exaggeration and you know it.

-Not as long as you would think. A few days, max.

-If you even KNEW the amount of shrink that Best buy stores have, you wouldn't mind them chcking your bags.

By FITCamaro on 3/30/2012 7:40:33 AM , Rating: 2
Having also worked at Best Buy, the general rule was the more expensive the item, the more the markup. Cheaper TVs had less markup than more expensive TVs. Why? Because people buying the more expensive TVs were less concerned with price than the guy using his welfare check to buy the biggest, cheapest TV that he could get.

By StraightCashHomey on 3/29/2012 1:55:40 PM , Rating: 2
I don't remember the last time I bought anything of significant value at Best Buy. I think it was for a kitchen appliance set that had a huge sale discount that would have costs hundreds of dollars to ship from an online site, which would have offset the money I saved. Otherwise, Amazon, Newegg, and other online retailers are where I get my stuff.

I'll occasionally go into Best Buy to see if there are any gadgets that I want, or possibly see what kind of TV looks the best, but I'll end up actually purchasing those items through some other online vendor.

It doesn't sound like they're going to let themselves go the way of Radio Shack, though.

By Dr of crap on 3/29/2012 3:12:16 PM , Rating: 2
But the Best Buy by me moved to a larger location about 4 years ago, and it's always very busy during Xmas. And most weekends as well. I'm guessing some do well, others not so much.

You still need to get a look at some stuff before you buy. It least I get that feeling on most things. There has to be some kind of place to go and LOOK at what you'll buy online - right?

By jimbojimbo on 3/29/2012 5:23:21 PM , Rating: 2
Yes, sadly I used to go to them before deciding if I wanted to order it from Amazon or Newegg. Unless something's on sale the prices at those sites almost always beat BBuy's prices. Now I'll peruse their deals and only go if they have a good sale going on for something, usually movies.

By jmerk on 3/29/2012 6:26:08 PM , Rating: 2
not having a best buy locally. you do the same things as i did when Borders was open. go down look at the book and buy it on amazon. at some point there will be no more brick and mortar stores where we view items and then buy it online.

Change with the times!
By Taft12 on 3/29/2012 9:51:42 PM , Rating: 2
Honestly, they're doing the right thing. There's just too much floor space dedicated to stuff nobody buys anymore like GPS, landline phones, Windows desktops... Averaging a couple thousand sqare feet less per store won't hurt anything. They don't need much floor space for the ultra-profitable cellphones and Geek Squad.

50 is a pretty small percentage of stores and it'll only be the lowest performing locations that are dropped.

RE: Change with the times!
By cyberserf on 3/30/2012 11:56:31 AM , Rating: 2
You must be kidding right?

RE: Change with the times!
By rudolphna on 3/30/2012 12:07:43 PM , Rating: 2
Uh, GPS are probably one of those most popular sellers in those stores. And people do buy desktops, because they don't want laptops, or they are gamers and want something that ISN'T a laptop.

Interestingly, the major push when I was there was
Appliances (Huge margins)
Cell Phones (Kickback from carriers for post paid plans. Wonder why the salesperson pushes mobile broadband and new cell phones? Because each store will get roughly $300 in pure margin from the carrier for EACH DEVICE.
Gaming: Trade-Ins, and profit on accessories.

Too many
By rburnham on 3/30/2012 9:18:47 AM , Rating: 2
There are three Best Buys within reasonable driving distance of my home. And at least two more if I wanted to go clear across town. This seems excessive to me. Two of the five could go and I wouldn't care.

RE: Too many
By Beenthere on 3/30/2012 12:48:50 PM , Rating: 2
There's a reason why people refer to them as Bad Buy... ;)

So this might be how....
By AEvangel on 3/29/2012 1:54:53 PM , Rating: 3
Companies get around paying taxes on profits....not that I think they should.

If we ignore restructuring costs and other one-time fees, Best Buy actually posted a profit better than Wall Street predicted at $2.47 per share.

Radio Shack?
By ender707 on 3/30/2012 6:03:15 PM , Rating: 2
I wonder how the Mobile locations will differentiate themselves from Radio Shack?

Newegg and Amazon both crush Bestbuy anyway. I have been using Bestbuy as a "Test Center" for years, I will miss that if they go under completely.

"If they're going to pirate somebody, we want it to be us rather than somebody else." -- Microsoft Business Group President Jeff Raikes
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