Best Buy sales, restructuring disappoint
By Dhanya Skariachan
(Reuters) - Best Buy Co (BBY.N: Quote) reported weaker-than-expected quarterly sales and said it would close 50 large U.S. stores and lay off another 400 employees, disappointing investors looking for even deeper cuts to turn around the world's largest consumer electronics chain.
The news drove Best Buy shares down as much as 10 percent to touch an intraday low of $23.97, shaving $920 million off its market capitalization to $8.4 billion. The shares were down just over 7 percent at $24.71 in afternoon trading.
Analysts said the company needs to close more than 50 of its 1,100 big box stores to cut costs at a time when shoppers are increasingly buying electronics online. The retailer, which employs 180,000 people, said it would cut 400 corporate and support jobs, but did not say how many jobs would be lost as a result of the store closures.
"These are steps in the right direction," BB&T Capital Markets analyst Anthony Chukumba said. "Beyond the weak (sales), I think what the market is telling you is that they don't think they went far enough from a restructuring perspective."
Best Buy should try to relocate more stores to smaller locations, sub-lease portions of their bigger stores and shutter more unprofitable stores, he said.
A Best Buy spokeswoman said it has yet to finalize the locations and timing of the store closings. The company expects the restructuring efforts to cut costs by $800 million in the next three years, including $250 million this year.
Overall, landlords with the biggest exposure to big-box stores are Canadian company Callowy Real Estate Investment Trust CWT_u.TO, National Retail Properties Inc NNN.N and Retail Properties of America Inc, which is set to go public and was formerly known as Inland Western.
"But nearly everyone has some exposure to Best Buy at this point," said Keefe, Bruyette & Woods analyst Benjamin Yang. Continued...