Best Buy CEO: 5K Workers Laid Off in February; Large-Format Store Closures Coming
Richfield-based electronics retailer Best Buy Co. on Thursday morning said it laid off 5,000 retail employees this month despite another quarter of strong sales.
In the company’s fourth quarter earnings call with investors, CEO Corie Barry noted that the company’s overall headcount had already been on the decline over the last year, mostly due to attrition after pandemic-induced furloughs. Best Buy started its 2021 fiscal year — which began in February 2020 — with 123,000 employees; by the end of the fiscal year, that number declined about 17 percent to about 102,000.
Despite the attrition, Barry said the company still had to make “difficult decisions.”
“Earlier this month, one of those decisions was to adjust the mix of full-time and part-time positions at each of our store locations,” she told investors. “At an aggregate level, this was due to having too many full-time and not enough part-time employees. As part of the process, part-time roles were offered to many of the displaced full-time employees who were interested and qualified. The end result was that we laid off and provided severance to approximately 5,000 employees, the majority of which were full time.”
This came even after record sales growth in the company’s fourth quarter, which ended Jan. 30. For the fourth quarter, Best Buy’s total revenue ticked up about 11 percent to $16.9 billion. The company’s domestic revenue also grew 11 percent, hitting $15.4 billion and marking an “all-time high for revenue in a single quarter,” CFO Matt Bilunas said on the call. The company’s profit grew to $816 million in the quarter, up from $745 million in the same quarter last year.
For its full fiscal year, Best Buy logged profit of $1.78 billion. That compares to $1.54 billion in the prior year.
But execs maintained that changes in consumer shopping patterns are forcing the company to reconsider staffing needs.
“Customer shopping behavior will be permanently changed in a way that is even more digital, and puts customers entirely in control to shop how they want,” Barry said. “Our strategy is to embrace that reality and lead, not follow. … Like many retailers, we believe much of what we saw last year will be permanent.”
Those changes will likely mean closures of some large-format stores, too. Barry noted that the company has closed about 20 large-format stores in each of the last two years. The retailer expects to close a “higher number this year.” In some cases, Best Buy will simply opt not to renew leases at some of its stores. Over the next three years, leases will be up for renewal at about 450 stores, according to Barry. It’s not yet clear how many of those leases will be allowed to expire.
Meanwhile, customers’ preferences for digital shopping will lead to some big changes at some of Best Buy’s brick-and-mortar locations. As part of its “ship-from-store” pilot, the retailer plans to reduce the square footage of its sales floors at certain stores to make way for warehousing space. The goal, Barry said, is to turn select stores into “hubs” for online shopping.
In the fourth quarter, online sales made up 43 percent of the company’s domestic sales.
Layoffs aside, execs noted that the company has made a number of “investments in support of employees.” By the end of its 2022 fiscal year, Best Buy will have spent $75 million on “enhancements to our structural employee benefits” in a three-year period, Barry said. That includes money for additional child care, Covid-19 medical expenses, a recently announced pandemic-related bonus for hourly workers, and other health-related benefits.
The company also boosted its starting wage to $15 per hour at the start of August, putting it in line with fellow Minnesota-based retailer Target Corp.
In addition, Barry noted that the company is now adding about 2,000 part-time workers. That will include a mix of former employees and hew hires.