The stock price of Best Buy Co., Inc. (NYSE:BBY) declined by almost 3 percent to $16.57 per share during the midday trading in New York following reports that the company will eliminate 400 jobs at its headquarters.
Hubert Joly, president and chief executive officer of the consumer electronics retailer is trying to restructure Best Buy by reducing its selling, general and administrative expenses by approximately $150 million.
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According to the company, the majority of its target savings will come from non-salary expenses. In addition, Best Buy Co., Inc. (NYSE:BBY) emphasized that it already achieved its initial reduction as the company focused on its core business by removing management layers and operational inefficiencies.
The restructuring initiatives of Best Buy called “Renew Blue” was developed and introduced by Joly during the analyst and investor meeting in November, last year. During the meeting, Joly announced the company’s plan to reduce its expenses by $750 million. According to the company, the $150 million cost reduction today represents the first phase of its Renew Blue transformation initiatives. Best Buy is expected to announce additional cost cutting measures within the year.
Best Buy Co., Inc. (NYSE:BBY) also added that the $150 million cost cutting does not include any store closure and that its blue shirt sales associates will not be affected by the job cuts. The company said, “Best Buy remains focuses on delivering its customer promise to provide a low price guarantee, the latest and greatest devices and services in one place, impartial and knowledgeable advice, the ability the ability for customers to shop when and where they want and have support for the life of the product.”
Best Buy is expected to report its earnings for the fourth quarter of fiscal year 2013 later this week. The company said it will provide further details regarding its cost reduction efforts during its earnings call.
Bloomberg cited that Best Buy announced its cost reduction initiative two days prior to the deadline given to Richard Schulze, founder and former chairman of the company to submit its buyout proposal. In October last year, Schulze gathered a consortium of private equity firms including Cerberus Capital Management LP, TPG Capital, Apollo Global Management LLC (NYSE:APO) and Leonard Green & Partners LP to acquire the company for $11 billion.
Schulze resigned from his position as chairman of the company after an investigation found that he failed to inform the board regarding the allegations against Brian Dunn, then CEO of the company that he committed inappropriate relationship with a female employee.