New realities
In spite of announcing net earnings for the quarter ending 29th November that were less than a quarter of the same period last year, US tech retailer Best Buy's shares jumped by almost 18 percent yesterday after it announce a number of cost-cutting measures.
"The historic slowdown in the economy and its effect on our business over the past 90 days have been the most challenging consumer environment our company has ever faced," said Brad Anderson, vice chairman and CEO of Best Buy.
"We believe that there has been a dramatic and potentially long-lasting change in consumer behaviour as people adjust to the new realities of the marketplace. We also believe that customers will continue to reward those retailers who understand their needs and desires, and offer relevant solutions at fair prices. Yet we clearly recognize that these changes require us to make significant adjustments to our present cost structure."
Citing the state of the global economy as the main cause for the move, the main cost-cutting measure is to offer "nearly all of its corporate employees" voluntary redundancy.
"Additional prudent actions will be taken to prepare the business, such as reducing our capital spending by approximately 50 percent next year, including a substantial reduction in new store openings in the United States, Canada and China," said Anderson.
The voluntary redundancies seem to exclude Best Buy Europe and there is no mention of the potential effect of these measures on the planned store openings from its joint venture with Carphone Warehouse next year.
Best Buy announced net earnings of $52 million for the last quarter, compared to $228 a year ago. A big part of this fall, however, was due to the decline in the value of its three percent stake in Carphone Warehouse. CPW's shares are currently trading at £90, having been worth £344.5 at the start of the year.
