Best Buy Co., Inc. (NYSE:BBY) confirmed on Friday that it will cut 2,400 jobs or 1.4 percent of its 167,000-employee workforce, reported Reuters. This will include 600 Geek Squad technicians.
The news of the jobs cuts follows the company’s March announcement that it would also close 50 stores. Best Buy spokeserperson Greg Hitt said on Friday that the announced cuts are part of the company’s turnaround plan. He commented to Dow Jones, “We are working to minimize the impact of the changes on employees while building the foundation for a strong future.”
Alluvial Fund performance update for the month ended May 2021. Q1 2021 hedge fund letters, conferences and more Dear Partners and Colleagues, Alluvial Fund, LP returned 5.4% in May, compared to 0.2% for the Russell 2000 and 1.0% for the MSCI World Small+MicroCap . . . SORRY! This content is exclusively for paying members. SIGN UP Read More
Analysts responded to the news by noting the layoffs would amount to only a fewer than one person for each Best Buy store but noted the value that Geek Squad adds for the retailer.
Michael Pachter, a Wedbush Securities Inc. analyst, said to Dow Jones because Best Buy lacks a products and pricing advantage, “the only real differentiator is that they have service, that service is installation and advice, and that’s what Geek Squad does.”
He added that the Geek Squad’s offerings are “the reason you spend 10% more buying a television from Best Buy, because you need someone to install it and get it done right.” Pachter also thought the Geek Squad cuts came in an effort to reduce costs.
The balance of Best Buy’s job cuts will come from 1,800 store positions.
Tough times for Best Buy
In stores open for at least a year–a key measurement for retailers–Best Buy has seen its sales decline in seven of its last eight quarters. It has watched business exit thanks to consumers utilizing stores as a “showroom” to check out electronic products before purchasing them for less elsehwhere–usually from online retailers including Amazon.com (NASDAQ:AMZN).
Last month, the company’s interim Chief Executive Mike Mikan said to shareholders that he was developing a way to make Best Buy “more relevant, more intelligent, more nimble” and that he would reveal a plan for this during the summer.
In addition to its business challenges, Best Buy has also faced a management shakeup with Mikan taking over for former CEO Brian Dunn; he left the company after an internal review disclosed an improper relationship by him with a female employee.
The investigation also discovered that Best Buy’s founder Richard Schulze had not informed the board of directors about the allegations against Dunn.
This resulted in Schulze losing his chairmanship; he subsequently resigned and is reviewing options for his 20.1 percent share in the company.
According to Reuters, Schulze is working with different investment banks such as Credit Suisse AG (NYSE:CS) to review a possible private takeover of Best Buy.
On Friday, Best Buy shares closed down 0.69 percent to $21.59.