Best Buy announces $1.7 billion loss, plans to close 50 stores and cut 400 jobs
The short-term outlook for Best Buy isn't good, but the world's largest consumer-electronics retailer is trying to position itself for long-term viability.
Today, the company announced a loss of $1.7 billion for the fiscal quarter ending March 3. Best Buy plans to close 50 stores in the U.S. by next year and cut costs by $800 million over the next several. 400 jobs will be lost in the process.
But Wall Street is apparently comfortable with Best Buy's long-term outlook, as the company's restructuring plan prompted its stock to rise by more than 4 percent in early trading.
In a statement following the company's 7 a.m. earnings announcement, CEO Brian Dunn said:
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. 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.
In an analysis published before the earnings announcement, the Star Tribune's Tom Lee wrote that Best Buy is trying to lower prices in order to better compete with online retailers like Amazon. The hope is that lower prices will ultimately help the company gain market share, but in the meantime stores must be closed and jobs cut to pick up the slack.
In other words, the company's new strategy is one of those short-term pain, long-term gain things. Unless you work at one of the 50 stores marked for extinction over the next year or so. In that case, the silver lining is no doubt harder to find.
-- Best Buy: On the road to extinction?
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