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Best Buy, Inc. (NYSE: BBY) has been predicting dire times recently. Strangely, though, the retailer's locations in my area seem to be packed every single time I pay a visit. Yet, the nation's largest consumer electronics retailer, which has a "virtual monopoly" in the market it serves, is seeing the worst sales period in its entire history. What gives?The retailer this week reported Q3 sales of $11.5 billion, with earnings of $52 million. That's a sharp drop from the year-ago earnings amount of $228 million, causing CEO Brad Anderson to indicate cutbacks were afoot at the retailer soon. Among them: offering voluntary buyouts to nearly all of its 4,000 corporate employees along with the possibility for layoffs if too few of these employees take up the retailer on its offer.
Best Buy dare not cut staff at its stores unless it is 100% needed. Any company who takes away from the direct customer experience -- in any form -- is just asking for trouble. Since Best Buy now has what could be considered a marketplace pretty much open to just itself, the world will be its oyster once the economy recovers. Until then, shoppers may be looking elsewhere for their electronics, looking but not buying or buying a whole lot less. And that will keep Best Buy behind the eight ball for quite a while regardless of its dominant market position.
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Reader Comments (Page 1 of 1)
12-19-2008 @ 4:04PM
JCH said...
Yippee! Gasoline is cheap. This is just great. Things could not get better. I knew it was too expensive last July. Thanks to the severe recession, the future is bright once again because we have cheap energy back.
Now let's laugh at those socialists in Venezuela and Iran. Those idiots, their economies are falling apart while ours is just peachy.
12-19-2008 @ 9:03PM
Randy said...
Maybe it is time to invest in FRY's... This store is crowded from open to close.. I see Best Buy using the long aisle at check out to sale high margin items, but the problemwith that is, it is about 100' to short....BB needs to branch out and try and be more like FRY's since Circuit City will be gone soon...
12-19-2008 @ 10:31PM
Iridium said...
How in the hell do you only make $52 million off of $11 billion on sales. There is a whole lot of waste there. Overall profit margins at Best Buy are probably 40%. TV sets and a few other products have low margin but that is made up for in music, movies and appliances.
This proves that the mega corporation needs to die. You have a company that somehow spends nearly $6 billion in one quarter on who knows what. It sure isn't the employees.
We need to go back to small individual stores. Sure each may only employ 10 people but they will be able to take care of those ten people far better than Best Buy.
12-20-2008 @ 12:11PM
Larry88 said...
Iridium, You must be kidding! Most corporations run on razor thin profit margins. Best Buy has a large sales volume that allows them to get the bet possible price and they are not alone there are many large retailers out there and they must compete for your dollars It's called competition. Who wins in this the American consumer by lower prices.
Now you say why are they laying people off, well they are looking at the future these are not foolish people they know what I'm telling you. Once Obamas Tax increases are in place that 52 million in profit will, Let's just say Best buy will be noting more than a memory! And this is why the economy is going to flatline.