Best Buy Co., Inc. (NYSE:BBY) responded to the release of a mixed report on 2011 today. The company posted a loss of $1.7 billion in the fourth quarter last year and announced a change of strategy to come to terms with a very different retail sector than the one they entered the financial crisis dealing with. The consumer electronics sphere has never been more of a growth area but the company is struggling with competition. Their old enemy, discounters, has been joined by a newer form of sales online that is constantly growing and constantly adding more to its armory. Stores like Amazon.com, Inc. (NASDAQ:AMZN) have the benefit of shopping from home and an increasing brand presence. There is also the issue of company’s product sold from their own websites, such as Apple’s devices, that creates another alternative to retail establishments. Best Buy announced a strategy they hope will allow them to deal with the new pressures and grow the company.
The new plan will see the company close around fifty of its big-box stores in the United States while at the same time opening one hundred new smaller format stores they hope will drive sales. At the moment the company has about 1000 large format stores in the United States. The company has said it plans to reduce its costs by $800 million by their 2015 fiscal year. The turnaround would be impressive though it will cost them in the mean time. Restructuring costs from this year are blamed for the company’s loss. Per share the company lost around $4.89. If the restructuring costs are omitted the firm earned around $2.47. This number compares favorably with the $1.65 earned last year but that is ignoring the problem.
Retail is undergoing a change at the moment as many stores, especially those selling certain kinds of goods, have begun to operate increasingly over the internet. The change is currently ongoing and so it is difficult to predict the future of certain sectors. If Best Buy does manage to restructure in a way that either draws more customers in or cuts costs in their operations then the company should not face too much trouble in the years ahead. IF the restructuring goes in the wrong direction and their ability to predict the tide of consumer choice is proven wrong the company could be in deep trouble. There are tough times ahead for the business but it may just be able to pull through based on a proactive and innovative strategy.
