Best Buy Eliminates 400 Jobs in Cost Reduction Plan
Best Buy Co. (BBY), the world’s biggest consumer-electronics retailer, cut 400 jobs at its headquarters as Chief Executive Officer Hubert Joly works to reduce costs.
The cuts and other actions will eliminate about $150 million in selling, general and administrative expenses, the Richfield, Minnesota-based company said today in an e-mailed statement. Best Buy, which wouldn’t disclose how many people work at its headquarters, employs about 8,000 in Minnesota, including in stores, and more than 160,000 globally.
Joly, who took charge in September, is working on a plan announced last year to reduce costs by $750 million as the retailer competes with Amazon.com Inc. (AMZN) and Wal-Mart Stores Inc. The job cuts come three days before Best Buy reports fiscal fourth-quarter results that will show whether holiday discounts and a policy matching competitors’ prices hurt profit.
“If you price-match and discount, you either cut expenses by an equal amount or end up producing lower returns,” Erik Gordon, a business and law professor at the University of Michigan in Ann Arbor, said yesterday by e-mail.
The cost reductions also come two days before the deadline for founder and former Chairman Richard Schulze to make an offer for the retailer.
Best Buy said today it postponed its earnings release to March 1 from Feb. 28 to see whether Schulze makes a bid. Best Buy “wants to allow for the expiration of the period of time that Schulze has to respond to the company,” Jeffrey Shelman, a company spokesman, said today by telephone.
Schulze proposed a buyout of $24 to $26 a share in August, about two months after resigning. He stepped down after a probe found he had failed to inform directors about allegations former Chief Executive Officer Brian Dunn was having an inappropriate relationship with a female employee.
Schulze has worked with three private-equity firms -- Cerberus Capital Management LP, TPG Capital and Leonard Green & Partners LP -- to arrange financing, people familiar with the matter have said. In December, the company extended the period for him to conduct due diligence through Feb. 28.
Best Buy shares sank as low as $11.20 in December and then recovered after Joly stabilized holiday sales with discounts and price-matching. He’s closing big-box stores, expanding smaller outlets that sell mobile phones and spending to improve e- commerce operations to compete with Amazon.
Sales at U.S. stores open at least 14 months were little changed in the nine weeks ended Jan. 5, Best Buy said last month. Global comparable-store sales fell 1.4 percent, less than the 2 percent decline projected by analysts Mike Baker at Deutsche Bank AG and Scott Tilghman of B. Riley & Co.
Best Buy will extend its holiday price-matching policy to get shoppers to stop using its stores for scouting products they later buy online elsewhere.
The year-round policy, designed to end the practice known as “showrooming,” takes effect March 3, Matt Furman, a Best Buy spokesman, said in a telephone interview earlier this month. The retailer also will reduce its merchandise return policy to 15 days from 30 days, he said.
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