Best Buy Co.
said sales surged in the holiday season as homebound consumers splurged on televisions and other electronics, but warned that its torrid growth would slow this year and said it has pushed forward plans to prepare the business for a more digital future.
The company is accelerating its plan to adapt to what executives think is a longer-term shift to online buying and virtual technology services, including shrinking its store workforce and using more store space to fulfill online orders.
The electronics retailer has been laying off workers and cutting hours for some store workers in recent weeks. The company employed about 102,000 at the end of its last fiscal year, down from about 123,000 at the start of the year, said Chief Executive
on a call with analysts Thursday. The decline is mostly due to attrition, she said. Around 5,000 workers were laid off or chose to take severance after their hours were cut, she said.
Laid-off workers have until Friday to find another position in the company or become eligible for severance, according to a “severance notification overview” given to some workers and viewed by The Wall Street Journal.
“The customer has completely changed the way they are thinking about shopping,” said Ms. Barry on a call with reporters Thursday. “We have been doing everything we can to adjust to the new reality.” After the busy holiday season, the company felt it “needed to adjust our labor to match that new reality.”
Traffic to stores and through online pickup was down about 15% during the three months ended Jan. 30, she said, which means less need for sales staff in physical stores. In addition, the company is making more full-time roles part-time for flexibility, she said.
Comparable sales, those from stores and digital channels operating for at least 12 months, rose 12.6% in the three months ended Jan. 30. The company had reported a 23% sales increase in the previous fiscal quarter.
Executives cautioned Thursday that growth would likely slow in the second half of this year. They forecast comparable sales between minus 2% and plus 1% for the new fiscal year. On that comparable basis, sales rose 9.7% in the fiscal year just ended.
The stock was down more than 6% in midmorning trading Thursday.
Best Buy is one of several companies trying to take advantage of pandemic-fueled shifts in shopping behavior and a big sales surge to fast track a new strategy, sometimes with big implications for rank-and-file workers.
“As part of Best Buy’s Enterprise Strategy, changes in our store operating and staffing model were implemented to support how we meet the customer where and when they need us, which is changing rapidly in today’s environment,” said the “severance notification overview” viewed by the Journal.
Some store workers said layoffs seemed counterintuitive after a few quarters of strong growth and difficult conditions for employees. “The last six months, it’s been rough,” said Richard Canepa, a 23-year-old who has worked at a Best Buy in Louisiana for five years, most recently as a full-time sales adviser.
Mr. Canepa stayed employed throughout the coronavirus pandemic, including working from home doing sales over the phone. Earlier this month the company gave him a choice of moving to a part-time role, which would mean losing his health insurance, he said. He took severance instead, and said he hopes to get a job in web development.
Other retailers that reported strong sales during the pandemic have made similar strategy acceleration plans.
the country’s largest retailer by revenue, said last week it would boost investments in technology, e-commerce and automation after a year of sales goosed by Covid-19. This year “has set us up to take the company where we want to take it and do it earlier than we had planned,” said Walmart’s finance chief,
in an interview last week. Walmart is giving raises to some workers such as shelf stockers and store workers who collect online orders, while leaving its minimum wage at $11 an hour for others.
Best Buy has experienced a more marked shift to online buying during the pandemic than retailers that sell groceries or other products that shoppers still tend to want to touch and feel. In the most recent fiscal quarter, its online sales rose almost 90% to $6.7 billion and made up 43% of total U.S. sales, nearly double compared with the same period last year.
During the pandemic the company ramped up curbside pickup of online orders and transitioned more store space to warehouse and fulfillment operations.
Part of the company’s strategy is training more store-level staff to do multiple jobs so they can easily switch tasks or take shifts at several stores. More than half of workers had been trained to “flex into different work zones,” said Ms. Barry, the CEO, in November, and some can add shifts by making deliveries to homes or working at different stores.
After downsizing its workforce last fiscal year, “from here, the question is how can our employees opt into various skills and certifications so they can meet the customer where they are going,” Ms. Barry said Thursday.
Workers shifted to do more virtual sales as well as chat, phone and remote support, Ms. Barry said on Thursday’s call. The company is hiring more people in areas such as supply chain, small-parcel delivery and technology, she said.
Store and regional managers have known for more than a year that a strategy shift was coming, said a Best Buy store manager. Still, the accelerated pace of the new strategy, its timing and workers targeted with layoffs has hit store morale, said this person.
“Holiday was tough,” said this manager. “We were working uncertain hours. We were working with potentially infected customers, potentially infected employees. I had employees quit, managers quit for no other reason than they thought they were going to die.” Around a dozen workers were laid off in this person’s store, most full-time employees, the manager said.
“Our stock [price] was skyrocketing,” said the manager. “That’s why we were so shocked that they decided to do these layoffs.”
Like other retailers, Best Buy gave workers a series of bonuses during the pandemic. It raised starting wages for U.S. workers to $15 last August. Earlier this week it said it would give another round of bonuses to workers, including those who were laid off recently. It is also offering workers a day of paid vacation as a reward if they are vaccinated for Covid-19, as well as paid sick leave after the vaccination if needed.
As soon as the pandemic hit, Best Buy moved quickly to conserve cash, said current and former executives. Late last year, the company offered early retirement buyout packages to all corporate employees over 55 years old, down from the traditional 60-year-old threshold, said some of these people. Best Buy closed its stores to all but curbside pickup early in the pandemic and in April it furloughed about 51,000 workers, including nearly all part-time employees.
By June it started to bring back some of those workers, but in some cases shifted their duties to online fulfillment or to answering customer-service questions from their homes.
Some chains haven’t fared as well through the pandemic and electronic retailers have struggled for years as more buying shifted online. This week, Fry’s Electronics Inc. said it was going out of business, permanently closing all 30 of its stores and shutting its operations.
Write to Sarah Nassauer at [email protected]
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