Best Buy Cutting 400 MN Jobs in “Initial Reduction”
Best Buy Company, Inc., on Tuesday announced another round of job cuts as part of its ongoing turnaround effort—this time eliminating about 400 people at its Richfield headquarters.
The electronics retailer said that the layoffs are part of an effort that will cut about $150 million in costs. But it marks only the first phase of a plan that CEO Hubert Joly announced in November, which calls for reducing costs by $725 million.
Best Buy described the latest cuts as an “initial reduction” that was “achieved by enhancing the focus on the company’s core business, removing management layers, and eliminating operational inefficiencies.”
The company said it will implement additional cost reductions later this year, although it didn’t specify when or how many more job cuts might be involved.
The latest 400 corporate job cuts were made Tuesday and did not target a specific type of position, according to Best Buy spokesman Jeff Shelman, who added that no in-store sales associates were cut. Meanwhile, no additional store closures are involved in the most recent phase of restructuring.
Best Buy currently employs nearly 8,000 in Minnesota and about 160,000 worldwide, according to Shelman. The company said it will provide more details about its cost-cutting efforts when it announces third-quarter financial results on Thursday.
Brian Sozzi—chief equities analyst at NBG Productions who closely follows Best Buy—said Tuesday’s announcement was “definitely expected.” He said that corporate cuts fall in line with Joly’s previously announced strategies, and the significant cost reduction implies that those eliminated were high-paying jobs.
Sozzi believes reductions at the corporate headquarters and continued investment in store employees is the proper strategy. “You want to keep as many people on the floor as possible to engage customers” and inform them of services such as year-round price matching, he added.
Best Buy has been trudging through a tumultuous period of restructuring, leadership turnover, and talks of a possible private takeover. It shuttered 50 big-box stores last year and recently revealed plans to close 15 big-box stores in Canada. The company announced multiple rounds of job cuts last year, including about 400 in Richfield and roughly 2,400 Geek Squad and store employees nationwide.
Best Buy announced in January that its same-store sales were essentially flat during the holidays—welcome news on the heels of several quarters of declines.
Some analysts, meanwhile, have recently hinted that Best Buy may be exhibiting signs of a legitimate turnaround. Some have credited the company’s new leadership team, including Joly and Chief Financial Officer Sharon McCollam, for progress made.
Meanwhile, founder Richard Schulze has been pursuing a possible takeover of the company. Last fall, he struck a deal with the company’s board allowing him to review non-public financial information in order to put together a formal buyout offer. Schulze initially had until December to make an offer, but his deadline was later pushed back to the end of this month—meaning he apparently has only until Thursday to make a bid.
A recent report by The Wall Street Journal suggests that Schulze is considering scrapping his pursuit of a takeover in favor of buying a smaller stake in the company. A unnamed source close to Schulze, however, recently told the Star Tribune that the company’s founder is still working to acquire the retailer.
Best Buy is Minnesota’s third-largest public company based on revenue, which totaled $50.7 billion in its most recently completed fiscal year. Shares of Best Buy’s stock were trading down about 4.2 percent at $16.29 Tuesday afternoon.