In order to grow, Best Buy is shrinking.
The largest U.S. specialty electronics retailer for years expanded quickly by opening big-box stores across the country. But shoppers have started using the hulking stores as showrooms where they can test out products before buying them cheaper elsewhere.
To revamp the struggling chain, Best Buy said Thursday it plans to close 50 of its U.S. big box stores, cut 400 corporate jobs and trim $800 million in costs. The company, which has about 1,400 U.S. locations, also plans to open 100 smaller and more profitable Best Buy Mobile stores throughout the country. It is unclear what impact, if any, the announcement will have on Best Buy's Lexington Kentucky stores.
"How do we position the company so we're where our customers need us to be?" asked CEO Brian Dunn in a call on Thursday with analysts. "We're clearly going to have more doors and less square footage."
Best Buy is trying to avoid the fate of its rival Circuit City, which liquidated in 2009 after it struggled with the changing
electronics landscape. Sales of TVs, digital cameras and videogame consoles - once the bread-and-butter of electronics retailers - have weakened, while sales of lower-margin items like tablet computers, smartphones and e-readers have increased. The rise in competition from Internet rivals like Amazon.com and discounters like Target also has hurt electronics retailers.
To better compete, Best Buy is shaking up its business. In addition to closing some of its big box stores, the company said it will focus on what sets it apart from its rivals: Trained sales staff that can help shoppers get the most out of their tablets, TVs and other electronic devices, including tech support from its "Geek Squad" service and repair unit.
But even as the Best Buy announced its changes on Thursday, the Minneapolis-based company also posted a $1.7 billion fiscal fourth quarter loss that's partly due to restructuring charges. Despite the loss, Best Buy's adjusted results for the quarter topped Wall Street's expectations. But as investors worried that Best Buy's restructuring didn't go far enough, its shares slid nearly 7 percent to close at $24.77 Thursday.