Weighed down by the size of its big-box stores and facing competition from more nimble online-only competitors, Best Buy is embarking on a “transformational strategy,” its executives said in an earnings call today. For the company’s finance chief, Jim Muehlbauer, that will mean dealing with $800 million in cost cuts over the next three years.
Those savings will come in the form of 50 store closings, the elimination of 400 corporate and support jobs, and a decrease in the cost of goods sold. Muehlbauer said that through negotiations with vendors, the company will see lower expenses related to product returns and exchanges. He also expects to see savings from cutbacks in the use of information-technology consulting services.
Best Buy will earn between $50 billion and $51 billion in revenue during its fiscal year 2013, similar to the final number reported for the year it just finished up, Muehlbauer said during the call
The retailer also reported a net loss of $1.7 billion for its fourth quarter, which ended March 3. It attributes the loss to $2.6 billion in charges from an impairment charge, restructuring charges, and the purchase of a profit-sharing agreement from another retailer. Last year at this time, Best Buy made a $651 million profit.
Muehlbauer gave a straightforward presentation of the numbers while CEO Brian Dunn gave more color to analysts about Best Buy’s status. “While I’m pleased with many of the actions we’ve taken over the last few years that have improved financial benefits and improved customer experience, I believe we need to move faster to adapt to the realities of the market,” Dunn said, noting that the company plans to do that by decreasing store footage but adding more entrances per store.
Indeed, while the company will be shuttering some stores, it will also open more up — but on a smaller scale. Those include 100 stores that sell only mobile products and another 50 stores in China. Best Buy will also be encouraging customers to use its online channel, which the company sees as a growing area.
Asked about whether Best Buy would consider giving shareholders a dividend, Muehlbauer said the company’s priority is investing its money back into the business. “We looked at cash balances and ma[d]e sure we have the money available to invest in the transformation [Dunn] outlined,” Muehlbauer said. The retailer had $1.2 billion in cash and cash equivalents as of March 3 and bought back $1.5 billion worth of shares last year.