Shares are down in pre-market trading as investors sort through the consumer electronics giant’s latest earnings, and an ambitious plan to focus on mobile phone sales as it cuts total retail space. Best Buy says it will close 50 of its big box stores in the U.S. in the fiscal year that ends in February and remodel others to emphasise phone, video, and broadband services. Meanwhile, the chain will open 100 smaller Best Buy Mobile stores; it expects to have as many as 800 in 2016, up from 305 today. The chain also vows to “significantly improve the customer experience”: By the holiday season it will increase employee training and change compensation to offer “financial incentives for delivering on customer service and business goals.” All told, Best Buy expects to reduce its costs by $250M this year, and $800M by 2015. “We intend to invest some of these cost savings into offering new and improved customer experiences and competitive prices — which will help drive revenue,” CEO Brian Dunn says. “And, over time, we expect some of the savings will fall to the bottom line.”
The changes come as the retailer reported a net loss in the three months that ended March 3 of $1.7B — down from a $651M profit in the period a year ago — on revenues of $16.6B, up 3.4%. The revenue figure was well below the $17.2B that analysts expected. But the net loss was largely due to one time factors including an impairment charge for Best Buy Europe and closing of UK big box stores. Adjusting for that, earnings per share came in at $2.47, easily beating the $2.16 that the Street expected. About 13% of Best Buy’s domestic revenues came from sales of entertainment, with sales down 21.0% at stores open at least a year. Same store sales of consumer electronics were down 4.2%, and accounted for 38% of domestic revenues. But mobile phone and computer sales were up 7.6%, accounting for 38% of the revenues. Best Buy has been struggling to compete with online retailers led by Amazon, but says that its own online sales will grow 15% this year and hit $4B in 2016.
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