Best Buy Co reported weaker-than-expected sales for the key holiday quarter, prompting the world’s largest electronics chain to close 50 U.S. stores and cut 400 jobs in corporate and support areas.
Despite offering bigger discounts and free shipping to lure shoppers from its rivals including Wal-Mart Stores Inc and Amazon.com Inc, Best Buy’s same-store sales fell 2.4 % in the quarter, including a 2.2 % decline at its U.S. stores open at least 14 months.
Its sales rose to $16.63 billion, but fell far short of the analysts’ average estimate of $17.23 billion.
Best Buy’s shares fell 6.1% to $24.98 in early trading.
Unlike the 2010 holiday season, when Best Buy held the line on discounts and promoted only expensive goods, this time around it offered deep discounts on everything from flat-screen TVs to digital cameras.
It also promised to match any lower prices that its brick-and-mortar competitors advertised during the season’s peak and offered free online shipping.
Best Buy lost $1.7 billion, or $4.89 a share, in the fourth quarter that ended March 3, compared with net income of $651 million, or $1.62 a share, a year earlier. Excluding charges, it earned $2.47 a share.
Best Buy is now trying to focus on its smaller format stores. It will close 50 U.S. big-box stores and open 100 Best Buy small-format, stand-alone stores in the current fiscal 2013.
The retailer said it expects it’s restructuring to save about $800 million by fiscal 2015, including about $250 million this year.
Chief Executive Brian Dunn said “The changes should help lower the retailer’s overall cost structure”.
Best Buy plans to invest some of the savings into improving customer service, including expanding its Reward Zone Silver loyalty program, and giving store employees more training before the next holiday season, as Reuters stated.
“It will also offer competitive prices as part of its push to drive revenue, and over time, some of the savings should fall to the bottom line” Dunn said.