March 30, 2012

Best Buy is closing 50 stores after losing money

Troubled big-box electronics retailer Best Buy announced Thursday that it would close 50 large-format stores in the U.S. during the next year and focus on smaller mobile stores that sell wireless phones and tablet computers.

The company did not say how many of its 25 big-box stores in Arizona, including 17 in metro Phoenix, could close.

"We will announce details about specific store locations and timing for closings once they are finalized," Best Buy spokeswoman Kelly Groehler said. "We are working to ensure the impact to our employees will be as minimal as possible."

The company closed its Scottsdale Pavilions store at Pima and Indian Bend roads on the Salt River Reservation in January, and at the time it said more closures weren't contemplated. Additional Best Buy closures could add to the glut of vacant big boxes in the Phoenix area that have been weighing down retail real estate.

Best Buy announced the 50 closures along with its fourth-quarter earnings. That report included a $1.7 billion loss as comparable year-over-year sales and margins at its 1,100 retail stores continued to slip.

The closures, along with other measures, including the elimination of 400 corporate and support jobs, are aimed at saving the company $800 million per year.

"Best Buy is trying to cope with falling margins in selling traditional consumer electronics such as televisions and Blu-ray players, and getting squeezed by the likes of Walmart and Costco," said Jonathan Gaw, research manager at IDC, a market-research firm based in Minneapolis.

Consumers increasingly use Best Buy stores as showrooms where they can view merchandise before purchasing online, often from a lower-priced retailer such as

The company has been hurt by growing online purchases of music, videos, games and electronics that have diminished in-store sales and undermined its big-box retail format. The shift to online sales has left large voids in the company's stores where CDs, videos and games once were displayed.

Where possible, Best Buy has been giving back portions of its big-box stores to landlords. It also has been exploring other products to sell in the space, including more appliances and sports equipment such as treadmills.

The announcement Thursday indicated the company would step up the move toward smaller stores.

Concurrent with the closure of 50 big-box stores, some as large as 40,000 square feet, the company said it would open 100 significantly smaller Best Buy Mobile stores. The company did not say how many could open in Arizona.

Best Buy announced it would convert certain big-box stores in the Minneapolis-St. Paul and San Antonio metro areas to a connected-store format that the company tested in 2010 and 2011.

The connected stores are remodeled big-box stores that focus on broadband voice and data packages and services and act as delivery points for consumer goods purchased online. Based on the success of the tests of the new format in the two markets, the connected stores could be rolled out nationwide.

The company estimated that in Minneapolis-St. Paul and San Antonio, the new formats and store closures could reduce Best Buy's retail space by 20 percent.

by Max Jarman - Mar. 29, 2012 06:07 PM The Republic |

Best Buy is closing 50 stores after losing money

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