Best Buy Reports Earnings, Announces the Closing of 50 Stores
March 29, 2012 1:26 PM
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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
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.
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RE: Having worked for this company....
3/29/2012 7:30:29 PM
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.
"You can bet that Sony built a long-term business plan about being successful in Japan and that business plan is crumbling." -- Peter Moore, 24 hours before his Microsoft resignation
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