It's one thing when every other electronics and tech retailer is crying poverty, store closings, slowdown, sales forecast revisions, etc. But it's another when BestBuy does. This is really crazy but you know what, while we've seen positive steps by the dominant retail giant, we haven't seen innovation. They increase customer support, sales reps are friendlier, there's some new stuff in the stores (musical instruments and vacuums) but it's not that creative. Amazon is the real model for innovation and here BestBuy isn't close!!!
Best Buy Co. said Tuesday it is slashing capital spending and offering buyouts to corporate employees, as the consumer-electronics retailer posted a 77% drop in quarterly profit amid weak sales.
"The historic slowdown in the economy and its effect on our business over the past 90 days have been the most challenging consumer environment our company has ever faced," said Chief Executive Brad Anderson. "We believe that there has been a dramatic and potentially long-lasting change in consumer behavior as people adjust to the new realities of the marketplace."
Best Buy said that, as of Monday, nearly all of its corporate employees are eligible for a voluntary separation package in order to reduce corporate expenses "significantly." Layoffs may be required, depending on the response to the buyout offer, the company said.
Capital spending is expected to fall 50% in the next fiscal year with a "substantial reduction" in new store openings. The company opened 37 in the latest quarter alone, putting its total at 1,010 domestic Best Buy stores.
Best Buy is just the latest retailer to announce cutbacks in a slumping economy. Most notably, Circuit City Inc., a major rival of Best Buy, filed for bankruptcy-court protection last month.
For its fiscal third quarter ended Nov. 29, Best Buy reported net income of $52 million, or 13 cents a share, down from $228 million, or 53 cents a share, a year earlier. The latest quarter included a write-down of 22 cents a share on the company's investment in struggling U.K. chain Carphone Warehouse.
Quarterly revenue rose 16% to $11.5 billion, but same-store sales, or sales at stores open at least 14 months and including Internet sales, fell 5.3%. Best Buy, the nation's largest consumer-electronics chain, said its market share was higher than a year earlier, reflecting strong sales of computer products and televisions.
Gross margin rose to 24.9% from 23.5%, driven by strong European sales of higher-margin mobile phones, offsetting brisk sales of lower-margin notebook computers.
Best Buy lowered its fiscal-year outlook last month amid "rapid, seismic changes in consumer behavior" since mid-September. On Tuesday, the company reiterated its lowered fiscal-year view, while raising the low end of a projected same-store-sales decline to 5% from 8%.
Last week, Best Buy President Brian Dunn said business was picking up before Christmas, helped by a resurgence in sales of home theater and Blu-ray players and strong sales of gaming systems, "smart" phones and notebook computers.
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