Best Buy Co. Inc. said Thursday that it will close 50 big box stores this year and eliminate 400 jobs, mostly at its corporate headquarters, in a bid to boost profits amid declining stores sales in the United States.
The Richfield-based consumer electronics giant expects to save about $800 million in three years, including $250 million this year alone.
“I’m not satisfied with the pace of our transformation,” Dunn told analysts during a conference call.
The company has not yet finalized the list of stores to be closed, said spokeswoman Susan Busch.
As of noon, Best Buy stock has fallen nearly $2, or 8 percent, to $24.61, a sign investors are not impressed with Best Buy’s plan.
For the fourth quarter, Best Buy said it lost about $1.7 billion, or $4.89 per share, compared to a profit of $651 million, or $1.62 per share, during the same period a year ago. Sales at stores open for at least a year, a key measure of growth for retailers, fell 2.4 percent.
For the year, the company lost $1.2 billion, or $3.36 per share, compared to a profit of $1.3 billion, or $3.08 per share during fiscal 2011. Same-store sales declined 1.7 percent.
As consumer electronics have become more affordable and ubiquitous in recent years, Best Buy has lost sales to Amazon.com, Wal-Mart, Costco and Target. Last holiday season, the company acknowledged losing TV sales to other big-box stores, as well as retailers such as Staples and Office Depot.
In the past, as Best Buy’s stores lost market share, Dunn emphasized the retailer’s profit margins and driving sales through its multi-channel operations, including its website, mobile devices, phone centers and Geek Squad.
However, Dunn reversed course of late, telling invsetors that the company must instead focus on protecting its core store operations. And that means using promotions and discounts to fight Amazon and Wal-Mart for sales and market share.
In order to build out its multi-channel operations and to sell higher-value services to consumers, Best Buy must first drive shoppers to its stores, Dunn said.
“These changes will also help lower our overall cost structure,” Dunn in a statement. “We intend to invest some of these cost savings into offering new and improved customer experiences and competitive prices — which will help drive revenue. And, over time, we expect some of the savings will fall to the bottom line.”
The company said it expects to fully roll out this year its newly remodeled “connected” store formats in the Twin Cities and San Antonio. The formats feature “Central Knowledge Desks,” similar to the famous Genius Bars at Apple Stores where people can receive technical support and take classes.
Overall, Best Buy wants to reduce its retail square foot presence in those cities by 20 percent.
“We’re going to have more doors and less square footage,” Dunn said during the call.
He also left open the possibility that the retailer could close more big boxes in the future.
“I’m not wedded to a retail square footage” number, Dunn said.
Best Buy wants to speed up its digital sales, one of the company’s fastest growing businesses, but a relatively small unit compared to revenue from the company’s physical stores. Earlier this month, the retailer hired former Starbucks chief information officer Stephen Gillett to oversee its digital operations, including online and mobile offerings.