Best Buy To Close Stores After Dismal Earnings Report
MINNEAPOLIS (AP/WCCO) — Best Buy Co. said it plans to close 50 big box stores and open 100 small mobile locations in the U.S. in fiscal 2013 and cut $800 million in costs by fiscal 2015. The news came Thursday as the biggest U.S. specialty electronics retailer posted a fiscal fourth quarter loss partly due to restructuring charges, but its adjusted results topped Wall Street's expectations.
Best Buy's strategy of focusing on closing some of its hulking stores to concentrate on smaller Best Buy Mobile outlets illustrates the shifting nature of the electronics industry. Shoppers aren't flocking to big-box stores like they used to. And sales of TVs, digital cameras and videogame consoles have weaken, while sales of tablet computers, smartphones and e-readers have increased.
Rebecca Jarvis covers financial news for CBS in New York but this headline hit home for the Twin Cities native.
"It's hard for me because I used to work there, and I really loved my experience when I worked there over the summers in Minneapolis. But they're shutting down about 50 stores and cutting about 400 employees," said Jarvis.
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Most of the layoffs will be at Best Buy's corporate headquarters in Richfield. Best Buy hopes to save about $800 million over the next three years as it competes with online rivals such as Amazon.
Best Buy lost $1.7 billion, or $4.89 per share, for the period ended March 3. That compares with a profit of $651 million, or $1.62 per share, a year ago.
The Minneapolis company said its quarterly results included $2.6 billion in charges. They were mostly related to its purchase of Carphone Warehouse Group PLC's interest in the Best Buy Mobile profit-sharing agreement and related costs, as well as an impairment charge tied to writing off Best Buy Europe goodwill and restructuring charges.
Taking these items out, adjusted earnings were $2.47 per share, above the $2.15 per share that analysts surveyed by FactSet forecast.
Revenue rose 3 percent to $16.08 billion, but missed Wall Street's $17.18 billion estimate.
Best Buy's stock fell 32 cents to $26.30 before the market opened.
Revenue at stores open at least a year — an indicator of a retailer's health — slipped 2.4 percent. But it was a smaller drop than a year earlier when the company reported a 4.7 percent decline.
For the full year, Best Buy lost $1.23 billion, or $3.36 per share, compared with a profit of $1.28 billion, or $3.08 per share, in the prior year. Adjusted earnings were $3.64 per share, which tops the previous year's $3.43 per share.
Annual revenue rose 2 percent to $50.71 billion. Revenue at stores open at least a year fell 1.7 percent. In the prior-year period, the figure dropped 1.8 percent.
Going forward, Best Buy said it expects to reduce about $250 million of its costs in fiscal 2013. The company foresees fiscal 2013 earnings of $2.85 to $3.25 per share and adjusted earnings of $3.50 to $3.80 per share. Analysts expect earnings of $3.67 per share.
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