Best Buy laid off 2,400 employees this week as a changing retail industry forces the electronics giant to make deep and painful cuts.
The Richfield-based company said it gave layoff notices to 1,800 store employees nationwide, along with 600 members of its Geek Squad service team. The actions announced Friday, July 6, were part of a larger streamlining plan aimed at keeping Best Buy competitive with a new generation of rivals.
“These changes were previously announced as part of the leadership team’s ongoing turnaround plan,” said Bruce Hight, a spokesman for Best Buy’s board. “We are working to minimize the impact of the changes to store employees while building a foundation for a strong future.”
Best Buy has about 1,050 big-box stores, so the layoffs are the equivalent of two or three employees per store.
But although earlier indicated, Friday’s layoffs are the latest shock to hit Best Buy as it struggles to compete in an era in which its big-box stores are no longer the hottest thing in electronics retailing. Smartphone-wielding shoppers can compare prices in an instant, often while in a Best Buy store, and then buy in a instant from an online competitor.
“Given the challenges we face, Best Buy doesn’t have a day to waste,” interim CEO G. Mike Mikan told employees in May.
In March, then-CEO Brian Dunn finally conceded that a major overhaul — with severe pruning, especially at its stores — was necessary to secure Best Buy’s future. That drew relief on Wall Street, where Best Buy’s stores were scorned as dinosaurs. But inside the company, it meant real pain.
Under the plan, the company immediately closed 50 stores, laid off about 400 employees at its Richfield headquarters and shrunk the size of many remaining big-box stores. The layoffs announced Friday do not include any of those earlier job losses.
This week’s cuts extend the pain. The layoff of 600 Geek Squad employees appears to be mostly focused on repair positions, with fewer cuts to service operations. Best Buy repeatedly has stressed the need to improve its service and training as it tries to reposition itself to fend off competition from online-only rivals and discounter chains.
Employees were notified this week about the layoffs. For laid-off employees who go to customers’ homes, their jobs will end immediately, a company official said. For laid-off employees who work inside Best Buy stores, their jobs will end Aug. 1.
Best Buy said it is offering qualifying workers a severance package and job-placement assistance.
Apart from an industry in transition, Best Buy itself has been in almost constant turmoil since March. Dunn resigned in April after an inappropriate relationship with a 29-year-old Best Buy employee was disclosed; board chairman Richard Schulze later resigned from the company he founded 46 years earlier after failing to report Dunn’s conduct to the board; and now Schulze is dropping hints that he might mount a hostile bid to take the entire company private. A flurry of top executives also have resigned.
Despite all the challenges, Best Buy remains profitable, and it’s a powerful force with $50 billion a year in sales.
But its once-meteoric growth has stalled, so it’s seeking a new business model for a new age. It must compete with manufacturers such as Apple that have their own fleet of stores; with discounters such as Wal-Mart and Target that keep beefing up their electronics departments; and with online-only retailers such as Amazon that are quickly gaining market share.
Last week, Best Buy unveiled a prototype for what it called its “Connected Store,” featuring a Geek Squad help desk in the heart of the sale floor, easier pickup for items ordered online and a greater level of staffing — including a larger Geek Squad presence.
That prototype is being tested in two urban areas, San Antonio and the Twin Cities. If it performs well, the company hopes to roll it out nationwide — suggesting that down the road, the Geek Squad could grow again.
In its home state of Minnesota, Best Buy already has closed six big-box stores, laying off more than 300 store employees here. It also eliminated about 400 corporate-level jobs, mostly at its Richfield headquarters. Because it’s all part of the same reorganization, it’s likely that the bulk of Best Buy’s job losses in Minnesota came during that first wave.
In Friday trading, shares closed down 15 cents, or 0.7 percent, at $21.59.
Tom Webb can be reached at 651-228-5428. Follow him at twitter.com/TomWebbMN.
