Electronic retail giant Best Buy announced Thursday that it will close 50 big box stores in the United States and cut as many as 400 jobs at its corporate headquarters in an effort to improve its bottom line.
According to The Christian Science Monitor, Best Buy, once recognized as the discount king of consumer electronics, is caught between high-end brand stores like Apple Stores and low-cost Internet retailers like Amazon.
“Customers have been increasingly migrating online where they often find better deals, forcing Best Buy to figure out a reason why shoppers would need to visit an actual store,” the CSM report stated.
Last year, Best Buy lost a staggering $1.2 billion as it deeply discounted merchandise to keep pace with rivals Amazon and Wal-Mart.
Sue Busch Nehring, a spokeswoman for Best Buy, said the company has not revealed any detail about the locations of the 50 stores it plans to shutter, adding that the retailer will announce the specific store locations and timing for closings “once they are finalized.”
“We are quite deliberate and thoughtful when we make such decisions,” she said in an e-mail message. “We are working to ensure the impact to our employees will be as minimal as possible, while serving all customers in a convenient and satisfying way.”
In light of the job cuts and store closings, Best Buy plans to use the savings — $250 million this year and another $550 million by 2015, according to company projections — to convert its big boxes to smaller “connected stores” which will sell more connections and services with more focus on mobile phones, tablet computers and e-readers.
The company will experiment with the new store models in San Antonio, Texas and St. Paul, Minnesota.
“The renovation would reduce store square footage by 20%, and should be finished by next Christmas. These new so-called ‘Connected Stores’ will focus on selling cell phones, tablet computers and e-readers, as well as service plans not offered by Amazon and Wal-Mart. Best Buy employees in these new stores are expected to show customers how to connect electronics in the home.”
According to the IBTimes, Best Buy shares dropped 14.8 percent in the past year, wiping out about $4 billion in market cap. In that same span of time, the S&P 500 index was up 6.4 percent.
With news of the Best Buy store closings, the company’s stock fell nearly 7 percent, or $1.85, to close Thursday at $24.77.