The jig is up and the news is out, Best Buy plans to close 50 unprofitable big-box stores by 2013. There plan, in attempt to save $800 million in cost reductions come fiscal 2015, is to open 100 smaller stores in the United States and another 50 in China.
Since the release of this information, Best Buy stock (BBY) has dropped 8.5%. Best Buy’s Chief Executive Brian McDunn knows he’s losing out to the easy accessibility of an online market dominated by Wal-Mart and Amazon. He said on a recent conference call, “I’m not satisfied with the pace or degree of improvement,” Dunn said. “We still face an uncertain consumer environment. The changes will take time to flow through, but we are well positioned.” BBY is down as the company plans to cut $230 million in costs this year to generate savings in order to train store employees and spend money on promotions.
The company did not identify the stores that led to the decline in BBY, only that it will be 50 of 1,100 or so stores. The company closed multiple stores in multiple countries last year, including 11 in the U.K. alone. BBY slumps and the mini-stores will appear in kiosks at the mall amongst other places. "The company faces the ongoing core challenge: the ability to simultaneously drive wrote in a note to clients,” wrote Christopher Horvers, an analyst at JPMorgan Chase & Co., in a note to clients.