Best Buy is planning to remodel some of its big-box stores to focus on 'connections,' and the company is investing more in selling mobile phones and tablets.
By Roland Jones
Best Buy's announcement that it plans to shutter 50 of its big-box electronics stores after losing $1.7 billion in its latest quarter has some wondering whether the retailer will go the way of onetime rival Circuit City.
Circuit City filed for bankruptcy in November 2008 and eventually liquidated in a move that appeared to leave Best Buy in a strong competitive position. But the retail landscape has a way of shifting rapidly, especially when it is being trampled on by an 800-pound gorilla named Apple, which is "taking all the oxygen out of the consumer electronics complex," according to UBS retail analyst Michael Lasser.
?The environment for consumer electronics has changed dramatically in the last few years,? Lasser told CNBC.
For years, discount retailers like Wal-Mart and web-based retailers like Amazon.com have become major players in the retail electronics businesses. And Apple?s presence as a provider and retailer of its own wildly popular products has also put pressure on brick-and-mortar retailers such as Best Buy.
?It?s just now a question of whether big-box retailers can fight back and win back some of that share,? he said.
Best Buy said Thursday it would close 50 big box stores over the next year and lay off an additional 400 corporate employees in an effort to cut $800 million in annual costs.? At the same time the company is opening 100 more smaller-format stores focusing on mobile phones and tablets.
"How do we position the company so we're where our customers need us to be?" asked CEO Brian Dunn in a call with analysts Thursday. "We're clearly going to have more doors and less square footage."
The company, which has not disclosed which stores will close, has a total of 1,099 retail locations nationally, including 305 of the smaller Best Buy Mobile stores.
Analysts are not convinced that Best Buy is out of the woods. Best Buy stock fell 7 percent Thursday after the announcement.
Brian Nagel, a research analyst at Oppenheimer, said Best Buy?s restructuring plans are ?long overdue,? but also fraught with danger, given that they are taking place when the retail electronics environment is ?quite challenging.?
?Attempting to undertake this kind of a restructuring in a weak environment can be very problematic,? he told CNBC, adding that he is concerned the company is attempting a major upheaval in its operations when ?competition is getting ever more fierce.?
Scot Ciccarelli, an analyst at RBS Capital Markets, said the company?s planned store closings and cost cuts will help it return to financial health, but its core business continues to decline, and that's not a good sign.
?It?s hard to imagine investors being too excited? when earnings are declining, Ciccarelli said in a research note.
The Associated Press contributed to this story.
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