Best Buy is bracing for significant cost-cutting — including job reductions and fewer store openings — as it continues to grapple with a “dramatic and potentially long-lasting” change in consumer spending.
The consumer electronics retailer reported quarterly earnings this morning down 77 percent from a year ago. It took in $52 million net earnings for the three months ending Nov. 29, compared with the $228 million it made during the same period last year.
The earnings plungewas caused in part by a drop in value of the company’s investment in The Carphone Warehouse Group. Best Buy bought nearly 3 percent of the outstanding shares of Carphone earlier this year as it partnered with the company on a new retail expansion in Europe.
Not counting the Carphone loss, Best Buy says earnings would have been about 35 cents per share, a decrease of 34 percent. Instead, the company earned 13 cents per share, just barely over half the amount Wall Street analysts expected from the company.
CEO Brad Anderson said in this morning’s statement that Best Buy faces a “historic slowdown in the economy,” one that has the retailer preparing for “significant adjustments” to its cost structure.
“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.
““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,” Anderson said.
Best Buy offered buyouts Monday to nearly all 4,000 employees at its corporate headquarters in Richfield. The company didn’t announce any layoffs, but it said “involuntary reductions” may be required depending on the outcome of the voluntary program.
The company also signaled for the first time that spending cuts will include a “substantial reduction” in new store openings in the United States, Canada and China. Other retailers, including Target, already made similar announcements about store openings earlier in the fall.
The third quarter wasn’t without positives. Best Buy’s market share continued to grow as its direct competitors stumbled far worse. Circuit City has filed for bankruptcy and is closing stores across the country. The already bankrupt Tweeter chain is closing all of its stores for good.
Customer satisfaction scores at its domestic stores continued to set record highs, the company said. And U.S. employee turnover is less than it was a year ago, it said, decreasing to 45 percent.
“We have some tough choices to make in response to the turbulent conditions our customers are facing,” said COO Brian Dunn, “but our recent revenue performance versus the industry reinforces our commitment to our long-term strategy of helping people unlock the promises of technology.”