Best Buy Co. Inc., Minneapolis, Minn., reported a $1.7 billion fourth-quarter net loss, compared to net income of $651 million for the prior-year period. The fiscal fourth quarter 2012 results include $2.6 billion of charges primarily related to the actions announced on November 7, 2011, which consist of the purchase of Carphone Warehouse Group plc’s (CPW) share of the Best Buy Mobile profit share agreement and related costs, and write-off and restructuring charges. Revenue for the quarter was essentially level: $16.630 billion compared to $16.083 billion in 2011.
Sales for the full year ending March 3 were $50.705 billion, compared to $49.747 billion last year.
“We are taking major actions to improve our operating performance,” says Brian J. Dunn, CEO, of Best Buy. “As part of our multi-channel strategy, we intend to strengthen our portfolio of store formats and footprints — closing some big box stores, modifying others to our enhanced Connected Store format, and adding Best Buy Mobile stand-alone locations — all to provide a better shopping environment for our customers across multiple channels while increasing points of presence, and to improve performance and profitability.
“These changes will also help lower our overall cost structure. We intend to invest some of these cost savings into offering new and improved customer experiences and competitive prices — which will help drive revenue. And, over time, we expect some of the savings will fall to the bottom line. At the same time, we will continue to accelerate our key initiatives — growing connections and services, expanding our digital capabilities and growing our business in China.”
The company plans $800 million in cost reductions by fiscal 2015; including approximately $250 million in fiscal 2013. Specifically, this will include closure of 50 U.S. Best Buy big box stores in fiscal 2013, cost savings in corporate and support structure from IT services savings, procurement savings on non merchandise purchases, a reduction in outside consultant services and reduction of approximately 400 positions in corporate and support areas, and savings in cost of goods sold driven by reduction of product transition costs, lower product return and exchange expenses and supply chain efficiencies.
Best Buy’s retail store strategy is to increase points of presence, while decreasing overall square footage, for increased flexibility in a multi-channel environment. The company intends to remodel key stores with a new Connected Store format in fiscal 2013, and to continue to build out the successful Best Buy Mobile small format stores throughout the United States.