One major retailer that stupidly continued to expand into he teeth of the Great Recession was Best Buy. Yet another one opened a couple of miles down the road from my house just a couple of years ago. At the time I wondered how they could expect to keep making huge profits off of increasingly strapped consumers. Well, it turns out they can't. Here is Forbes with the story:
Best Buy is closing 50 superstores and focusing on mobile in an effort to reduce expenses. But since when is cost cutting to profitability a successful retail strategy?Judging by the snarky attitude in this piece, I take it Forbes doesn't think much of this strategy. But of course, Best Buy's CEO thinks his own farts smell like the finest French perfume:
The electronics chain announced it would shutter 50 stores and concentrate on smaller stores selling mobile electronics. There will be 100 more of these locations by the end of this year and two markets — San Antonio, Texas and the Twin Cities — will receive remodeled superstores dubbed “Connected Stores.”
In order to help make technology work for every one of our customers and transform our business as the consumer electronics industry continues to evolve, we are taking major actions to improve our operating performance,” said 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.But Forbes has his number:
In so many ways, it feels like a shell game. The kind that companies use to deflect negative attention by waving their arms and yelling, “look over here!” Changing things up, reducing its footprint and getting out of too large or otherwise unfavorable locations is important and probably needed to be done long ago. But these changes look more like an olive branch to the financial community: a restructuring to reduce costs.Ha! The first two sentences right there sound a lot like something I might have written, actually. Closing stores isn't Best Buy's only change, however:
Management estimates a $300 million savings from the store closures and another $300 million in corporate reductions — Best Buy is also laying off 400 people at its Minneapolis headquarters.Which has pretty much been par for the course in corporate America ever since the recession officially (if not actually) ended three years ago.
Cost cutting its way to profitability.